Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold slid 0.7% to close under $1,879 as Treasury yields ticked higher on the prospect of more rate hikes and traders took profits from three straight winning sessions.

After last Friday's blowout report showed 517,000 new jobs were added in January, the markets have been caught between conflicting commentary from Fed officials.

On the dovish hand, Fed Chair Jerome Powell has repeatedly emphasized that "the disinflation process" is underway, reducing the need for aggressive monetary tightening. On the hawkish hand, a few officials indicated more rate hikes are likely in the short term.

Fed fund futures trading is pricing in a target rate peak of 5.1% in July, around a quarter-point higher than before the knockout nonfarm payroll report. But traders are also projecting rate cuts of up to a half point by the end of 2023, according to CME FedWatch, as inflation drops sharply.

The January CPI report, due next Tuesday, should give additional direction to the course of Fed policy.

Benchmark 10-year Treasury yields crept higher on the prospect of more hikes to come in the near term, pressuring gold by increasing the opportunity cost for holding it instead of bonds.

But the yield curve between 2-year and 10-year yields fell to its biggest inversion since October 1981 as the bond anticipates both higher rates in the next few months, as reflected in the high 2-year yield, and a weaker economy later this year. An inverted yield curve is typically seen as an indicator of recession.

The dollar slipped 0.2% on the dovish side of the Fed's conflicted jawboning and linger concerns about the economy. More Americans than expected filed for unemployment benefits last week, suggesting weakness in the labor markets despite the January jobs total.

The other precious metals were also lower. Silver and palladium each slid 1.2% while platinum lost 2.3%.

At the Comex close: April gold dropped $12.20 to $1,878.50; March silver slid 28 cents to $22.14; April platinum shed $23 to $964.20; and March palladium lost $19.20 to $1,616.70 an ounce.