Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinAfter closing regular trading with a gain of 0.3% to $1428, gold then surged another 1.3% in electronic trade, pushing above $1,449 after a prominent Fed member endorsed lower interest rates and the US destroyed an Iranian drone, spurring safe-haven demand.

New York Fed President John Williams spoke out strongly today in support of lowering interest rates, all but ensuring that the Fed will cut rates when it meets at the end of July. An influential committee member, Williams argued that "it pays to act quickly to lower rates at the first signs of economic distress." He also said rates should be kept "near zero" and inflation should be allowed to run hotter to quickly boost the economy.

Williams comments caused the dollar to tumble 0.5% against major rivals as the odds of a big rate cut increased dramatically. Based on trading in Fed-fund futures, CME FedWatch doubled the likelihood of a half-point cut in July to 69% after Williams spoke, up from 34% yesterday and 20% a week ago.

Lower rates tend to weaken the dollar by making it less attractive to foreign exchange investors seeking higher yield. A weaker dollar typically supports higher gold prices by making the metal less expensive overseas.

Rising Middle East tensions also drove gold's after-hours gains. President Trump announced the US Navy shot down an Iranian drone in the Gulf of Hormuz. Treasury yields plummeted on the news as investors sought safety.

The other precious metals were mostly higher. Silver and platinum rose 1.4% and o.3% while palladium fell 2%.

At the Comex close: August gold gained $4.80 to $1,428.10; September silver rose 23 cents to $16.20; October platinum picked up $2.80 to $849.90; and September palladium dropped $31.30 to $1,511.90 an ounce.