Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold surged 2% to close near $1,795 after sharply higher consumer prices stoked worries about stagflation, boosting demand for inflation hedges and safe-haven assets. It was the metal's highest finish in four weeks.

The Consumer Price Index rose 0.4% in September, more than expected, as Americans paid more for energy, food, rent, and other items. The inflation rate for the past 12 months rose to 5.4%, the fastest pace in 30 years and more than double the Fed's target 2%.

With shortages of labor and supplies affecting the US economy, high prices are likely to persist well into 2022 and could damage the nascent recovery. Economists are increasingly worries about stagflation, the pernicious combination of rising inflation and weak economic growth that plagued the 1970s.

Gold typically thrives during bouts of stagflation. Investors seek it out to hedge against the loss of purchasing power associated with inflation. At the same time, economic stagnation constrains the Fed from raising interest rates, its usual method of containing inflation, thereby preventing a rise in the dollar.

The dollar fell 0.5% against major rivals as traders speculated that high inflation may retard the recovery and slow the Fed's tightening plans for next year. A falling dollar supports gold by making it less expensive in other currencies, lifting overseas demand.

Benchmark 10-year Treasury yields initial rose on the CPI release before falling back into losses as investors, worried about growth, poured back into the perceived safety of government bonds. Falling yield support gold by decreasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

The other precious metals were also higher, with silver and palladium rising 2.9% each while platinum added 1.2%.

At the Comex close: December gold gained $35.40 to $1,794.70; December silver jumped 66 cents to $23.17; January platinum added $12.40, to $1,024.20; and December palladium rallied $58.30 to $2,106.10 an ounce.