Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold slipped another 0.4% to close under $1,725 as a strong dollar and global growth concerns continued to erode demand for alternative stores of value. It was the metal’s lowest finish since September 2021.

Tomorrow’s release of the latest Consumer Price Index is expected to show inflation climbing in June to a fresh 40-year high of 8.8% year-over-year, perhaps pushing as high as 9%. After slightly weakening in April, prices have risen for the past two months, putting the Federal Reserve on high alert before its meeting next week.

The central bankers are widely expected to rise interest rates sharply again at the July meeting. Fed funds future traders place the odds of another 75-basis-point at 93%, with a 7% chance of a full 1% increase, up from zero just last week.

The dollar rose again in the hawkish rate view, adding another 0.1% against major rivals to reach a new 20-year high. The euro fell briefly to parity with the greenback today for the first time since 2002, weakened by worries that a Russia-induced energy crisis could tip the eurozone into recession.

Moscow has shut down the chief supply line for natural gas to Germany, Nord Stream 1, ostensibly for annual maintenance. Government officials are worried, however, that it will not be reopened as punishment for Ukraine support.

Still, US benchmark WTI crude dropped more than 8% to under $96 per barrel on demand concerns after China, the world’s leading energy importer, placed nearly 30 million people under new Covid restrictions. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

While gold is often sought as a hedge against loss of purchasing power, it comes under pressure when interest rates rise to combat inflation. Higher rates strengthen the dollar by attractive Forex investors seeking higher yield. A stronger dollar weighs on gold by making it pricier other currencies.

Benchmark 10-year Treasury yields fell further as investors, worried the Fed will be too aggressive in monetary tightening, sought safety in government bonds. The yield curve between 2- and 10-year Treasurys inverted further on the dimming prospects for the economy. An inverted yield curve is often seen as a future recession indicator.

The other precious metals were also lower, with silver dropping 0.9% while platinum and palladium lost 3.8% and 7.2%, respectively.

At the Comex close: August gold slipped $6.90 to $1,724.80; September silver dropped 17 cents to $18.96, a two-year low; October platinum shed by $32.60 to $828.10; and September palladium futures plunged $156 to $2,015.60 per ounce.