Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold recouped 0.6% to close above $1,950 as bargain-hunters swept in ahead of tomorrow’s release of the October Consumer Price Index. The metal had declined 3% last week, the most since September, on hawkish Fed talk and lower tension in the Middle East.

Consumer inflation is widely forecast to have risen a moderate 0.3% in October, which would suggest that the Fed’s rate-hike cycle is taking its toll on prices and the economy. But if the CPI comes in hotter than expected, the odds of another rate hike will increase, and gold may come under additional pressure.

The Fed funds futures market is currently pricing in a 14% chance of a December hike, up from around 5% just a few days ago. The shift was driven by hawkish comments from Jerome Powell.

Speaking to the IMF last week, the Fed Chair said the central bank is “not confident” that monetary policy is yet “sufficiently restrictive to bring inflation down to 2%.” He added that the Fed “will not hesitate” to tighten further.

The hawkish posture shifted the narrative that rate hikes are over—one that Powell himself set in motion with relatively dovish comments after the recent FOMC meeting. But many analysts believe the Fed Chair was only talking tough and has no intention of actually raising rates again.

Tomorrow’s close-watched CPI release, followed by Wednesday’s data on retail sales, could tip the scales in either direction.

Benchmark 10-year Treasury yields receded slightly, and the dollar pulled back ahead of the inflation data. Falling yields lift gold by reducing the opportunity cost for holding it. A softer dollar makes gold less expensive in other currencies.

The other precious metals were also higher. Silver and palladium each added 0.4% while platinum rose 2.1%.

At the Comex close: December gold gained $12.50 to $1,950.20; December silver added 8 cents, to $22.36; January platinum picked up $18 to $863.60; and December palladium rose $3.50 to $982.30 and ounce.