Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold gained 0.2% to close above $2,048 as yields and the dollar declined on soft jobs data and growing concerns that the Fed may be heading for a policy mistake by delaying rate cuts. It was the metal’s highest finish in nearly a month.

At yesterday's conclusion of its two-day meeting on monetary policy, the Fed left interest rates unchanged while signaling that a pivot toward rate cuts may occur sometime, but not right away. Fed Chair Jerome Powell, in his press conference, was more emphatic, saying explicitly “not March.”

Typically, a hawkish message from the Fed Chair spurs Treasury yields to rise on the prospect of higher interest rates for longer. But instead, benchmark 10-year yields have eroded to a one-month low under 3.9% in Powell’s wake as investors seek the safety of government bonds, worried that the Fed is again behind the curve and may needlessly stifle the economy with high interest rates.

Gold benefits from falling yields because they lower the opportunity cost for holding it instead of bonds as a safe-haven asset. Tracking lower with yields, the dollar dropped 0.2% against major rivals, further supporting gold by making it cheaper in other currencies.

Soft jobs data also contributed to gold’s gains. First-time jobless claims rose to nearly a three-month high of 224,000 last week, suggesting the red-hot job market is cooling. Private payrolls reinforced this view by adding a meager 107,000 in January, according to ADP. Tomorrow’s nonfarm payrolls report will provide a more definitive outlook.

Several weeks ago, Fed fund futures traders placed the odds of a March rate cut at more than 80%. After a series of hawkish statements by regional Fed officials recently, the odds dropped to around 50/50. Following Powell’s comments yesterday, the odds fell again to 38%.

But the likelihood of a quarter-point rate cut at the Fed’s May meeting has risen to around 97%, according to CME FedWach, and traders are still pricing in a total of six rate cuts of that size by December, which is bullish for gold.

The other precious metals were mixed, with silver adding 0.3% while platinum and palladium fell 1.1% and 2.5%, respectively.

At the New York spot close: gold gained $4.60 to $2,053; silver picked up 8 cents to $23.23; platinum shed $10.30 to $922.30; and palladium lost $25.20 to $971.60 an ounce.