Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinNew York spot gold gained 0.2% to close above $2,347 as yields and the dollar declined ahead of tomorrow's launch of the Fed's two-day meeting on monetary policy, boosting alternative stores of value. It was the metal's third straight winning session. Silver rose 0.4% to $27.37 an ounce.

The Fed is almost universally expected to leave interest rates unchanged at this week's meeting. But speculation is growing that the central bank will be slower to pivot toward rate cuts in coming months than the markets—and the Fed itself—expected.

Six months ago, Jerome Powell began laying the groundwork for rate reductions, saying the Fed was increasingly confident that inflation was under control and interest rates had reached peaked at 5.25% to 5.5%. Fed funds futures markets began pricing in four to six rate cuts for 2024.

Over the past two months, however, inflation readings and US economic data have been overall stronger than the Fed anticipated, causing Powell to drop the dovish outlook. The question now is whether he will become positively hawkish at the meeting this week.

Fed fund futures traders are pricing in just one rate cut in 2024, with the odds almost evenly split between September and December.

Still, benchmark 10-year Treasury yields pulled back from five-month highs, settling near 4.6% as investors hedged their positions in case the Fed's messaging is more neutral than hawkish. Lower yields support gold by reducing the opportunity cost for holding it instead of bonds for safety.

Also helping gold, the dollar fell 0.3% against major rivals led by the yen when the Bank of Japan intervened to boost the currency, lifting it from a 10-year low against the dollar. A falling dollar lifts gold and the commodities by making them cheaper overseas.

Platinum and palladium rose 4.3% and 2%, respectively.

At the New York spot close: gold gained $4.08 $2,347.20; silver added 12 cents, to $27.37; platinum picked up $39.40 to $954.10; and palladium climbed $19.30 to $977.60 an ounce.