Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold slipped.3% to close above $2,022 as Treasury yields crept higher on uncertainty about the path for near-term interest rates from the Fed.

At its January meeting, according to the minutes released today, the Fed said it would be inappropriate to cut interest rates without “greater confidence that inflation is moving sustainably toward 2%.” While “a couple” committee members cited the risks of maintaining “an overly restrictive stance for too long,” the majority thought the greater risk would come with cutting too soon.

Separately, Richmond Fed chief Thomas Barkin told Bloomberg today that inflation data in January, with consumer and wholesale prices rising more than expected, has complicated the Fed’s decisions on monetary policy. Sticky inflation in shelter and services remains a problem despite falling goods inflation, he added.

Benchmark 10-year Treasury yields rose back above 4.3% as traders bet that rate cuts won’t come until June at the earliest. Fed fund futures markets now see a 71% likelihood of an initial quarter-point reduction in June. Higher yields create a headwind for gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

Backstopping gold’s slide, the dollar dipped 0.1% against major rivals on expectations that China will enact more easing measures to stimulate its economy, which would boost emerging market currencies. Yesterday, the PBOC slashed its prime lending rate by the most ever.

The other precious metals were sharply lower, with silver dropping 1.7% while platinum lost 2.7% and palladium plunged 3.4%.

At the New York spot close: gold slipped $5.20 to $2,022.30; silver slid 26 cents to $22.87; platinum shed $24.70 to $889.60; and palladium retreated by $33.40 to $949.90 an ounce.