Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold slid another 0.5% to close under $1,787, a six-week low, as the markets continued to react to the Federal Reserve's hawkish pivot. The metal fell 2.5% for the week for its biggest weekly retreat since last November.

Following its policy meeting this week, the Fed signaled an aggressive new approach to fighting inflation, announcing a likely rate hike in March with three or more following throughout the year. In addition, it will begin to unwind its $9 trillion balance sheet, amassed in part though pandemic easing programs.

As if on cue, the Personal Consumption Expenditures index of inflation leapt 5.8% in 2021, the fastest pace since 1981, according to data released today. The PCE is the Fed's preferred inflation gauge. Separately, the Labor Department reported US employment costs rose another 1% in December for 12-month increase of 4%.

The dollar scored its biggest weekly rise in seven months following the Fed's hawkish turn, surging 1.7% on the expected interest rate differentials with major rivals. Higher rates attract Forex traders seeking yield, weighing gold in turn by making it more expensive in other currencies.

Benchmark 10-year Treasury yields pulled back for a second day, however, reflecting concern that the Fed may be tightening into a weakening economy.

While US GDP grew 6.9% in Q4 of 2021, the Atlanta Fed's forecast for real GDP growth in Q1 of this year is just 0.1%. Consumer spending, which comprises around 70% of the economy, sank 0.6% in December on the surging pandemic. And the University of Michigan's survey of consumer sentiment slumped to a 10-year low in January because of inflation.

Gold is expected to feel headwinds from rising interest rates if the dollar rallies further. But demand for the metal as an inflation hedge and safe-haven asset should continue to provide support, especially if the economy falters or geopolitical tensions persist around a possible invasion of Ukraine by Russia.

The other precious metals were mostly lower for the day and week. Silver lost 1.7% for a weekly decline of 8.3%, its biggest since September 2020. Platinum slid 1.5% today and 2.8% this week. Outlier palladium added 0.4% today for a weekly surge of 13% behind worries that supplies from Russia may be interrupted by Ukraine turmoil.

At the Comex close: April gold slid 8.40 to $1,786.60; March silver dropped 37 cents to $22.30; April platinum dropped $15.20 to $1,006.60; and March palladium picked up $8.80 to $2,375.30 an ounce.