Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold slid 1.6% to close at a four-week low under $1,295 as traders reacted to yesterday's hawkish signals from the Fed.

Following its two-day meeting on monetary policy, the Federal Reserve told the markets to expect another rate hike this year, most likely in December. Many Fed-watchers were expecting a less-hawkish message because inflation has remained stubbornly below Fed targets.

Higher interest rates tend to boost the dollar by attracting foreign exchange investment seeking higher yield. A stronger dollar, in turn, pressures gold and other commodities priced in it by making them more expensive overseas.

In addition, the central bank announced the start of quantitative tightening, or the gradual unwinding of the $3.7 trillion in bonds purchased from 2008 to 2014 via the monetary stimulus program known as quantitative easing. The pace of tightening will be extremely gradual. Monthly liquidations of $10 billion will begin next month and ramp up by $10 billion each quarter to a maximum of $50 billion.

Ultimately, the Fed is expected to unwind only $1 to $2 trillion of its $4.5 trillion balance sheet, according to NY Fed President William Dudley, leaving a huge amount of extra liquidity in the market. Many bond analysts think the monetary tightening will have trivial effect on long-term yields for this reason, given the huge amount of total debt outstanding.

The other precious metals were mostly lower, with silver and platinum dropping 1.8% and 0.6%, respectively, while palladium edged up 0.2%.

At the Comex close: December gold slid $21.60 to $1,294.80; December silver dropped 32 cents to $17.02; October platinum lost $5.50 to $939.90; and December palladium added $1.40, to $911.55 an ounce.