Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold slid 0.4% and the dollar gained after a new ISM report showed the economy to be slowing down. Gold then dipped another 0.2% after hours when the Fed offered no further policy accommodations in its post-meeting statement. The latest ISM index data indicate that manufacturing contracted for a second straight month. In addition, the ISM employment gauge fell substantially to its lowest reading since November 2009. The dollar and Treasury prices both rallied on the data. A rising dollar typically suppresses the gold price because gold is denominated in dollars internationally, making it more expensive to holders of other currencies. Silver and palladium dropped 1.4% while platinum lost 1.1%.

At the close: August gold slid $6.80 to $1,603.70; September silver fell 38 cents to $27.54; October platinum lost $15.60 to $1,401.50; and September palladium retreated $7.95 to $582.60 an ounce.

The biggest news of the day had remarkably little impact on the gold market. The Federal Reserve decided to stand pat and gold barely dipped in electronic trade, perhaps indicating that policy changes had not been priced in. Traders, indeed, seem to have adopted a "show me the money" attitude after three months of disappointment in Fed inaction. The Fed's statement acknowledged decelerating economic activity, elevated unemployment, and a depressed housing sector. It also confirmed near-zero interest rates through late 2014 and the continuation through year-end of so-called Operation Twist, the program announced in June that extends the maturity of the securities it has already purchased.

Most economists expected near-zero interest rates to be extended into mid-2015, and many thought another round of quantitative easing would (QE3) would be announced today. Perhaps laying the groundwork for policy changes in September, the Fed strengthened the language of its commitment to helping the economy by asserting that it "will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery."