Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold slipped 0.3% to close under $1,988 despite pullbacks in yields and the dollar as oil prices receded on hopes that diplomacy in the Middle East might avert a broader conflict.

Leaders from the EU have joined the US and UK in urging a “humanitarian pause” in hostilities to allow aid to reach Palestinians in Gaza. Although Israel has continued airstrikes in Gaza and southern Lebanon. French and Dutch emissaries will visit Israel this week to show support and lobby for containment.

Investors were also encouraged that Israel, while massing troops on the border, has yet to launch its expected full-scale ground assault into Gaza.

Oil prices fell sharply on speculation that these diplomatic efforts may prevent the interruption of supplies through the Strait of Hormuz. US Benchmark WTI crude dropped 2.5% to under $86 per barrel. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

After breaching 5% in intraday trade for the first time in 16 years, US benchmark 10-year Treasury yields fell back under 4.85% as investors took advantage of the higher payout and bought back into bonds. Residual worries about the Middle East also drove inflows.

Tracking lower with yields, the dollar slipped 0.3% against major rivals, cushioning gold’s drop by making it less expensive in other currencies, lifting demand overseas.

Gold has rallied more than 8% in the past two weeks on flights to safety driven, in large part, by the attack by Hamas on Israel. At the same time, Treasurys have sold off and yields have risen as investors anticipate that the conflict will complicate the Fed’s plans to fight inflation, perhaps forcing the central bank to keep interest rates elevated for longer than previously expected.

This week’s release of the PCE price index, the Fed’s favorite inflation gauge, and the Q3 GDP figures should help clarify direction on monetary policy.

Adding further complication, the US budget deficit surged to $1.7 trillion in fiscal 2023, up 23% from a year ago, as federal revenue and spending both fell. Spending to pay interest the monstrous public debt also jumped 23%, something that will only increase if interest rates and yields continue to rise.

The other precious metals were mixed, with silver falling 1.2%, platinum holding nearly flat, and palladium rising 2.5%.

At the Comex close: December gold dropped $6.60 to $1,987.80; December silver lost 29 cents to $23.21; January platinum dipped a dime to $905; and December palladium picked up $28 to $1,139.30 an ounce.