Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold slipped 0.5% to close above $1,719 as bond yields rose ahead of tomorrow’s Fed meeting. It was the metal’s first down session in three.

This week’s meeting of the FOMC is expected to bring another jumbo rate hike of 75 basis points to quell the hottest consumer inflation in 41 years. While the increase largely been priced into the market, investors will be watching closely for future guidance on monetary policy at the meeting’s conclusion on Wednesday.

It is not unusual for gold to retreat ahead of a Fed meeting as traders reposition holdings against surprises. Fed fund futures show a 25% likelihood of a full 1% rate hike, which would further pressure gold by lifting yields and the dollar.

The Fed’s increasingly hawkish stance comes against a backdrop of growing anxiety about the economy. Claims for jobless benefit have risen to an eight-month high; regional manufacturing gauges have slumped; and consumer sentiment is hovering around an all-time low.

The odds of a recession have risen to 40% with 12 months and 50% within 24 months, according to a recent Reuters poll of economists.

Benchmark 10-year Treasury yields crept back above 2.8% on the rate hike expectations, pressuring gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

The other precious metals were mostly lower, with silver and palladium dropping 1.6% and 0.8%, respectively, while platinum picked up 0.2%.

At the Comex close: August gold slid $8.30 to $1,719.10; September silver fell 29 cents to $18.39; October platinum added $2.10, to $869.30; and September palladium slipped $15.80 to $2,003 an ounce.