Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold surged 1.7% to close just under $1,850 as equities tanked on higher interest rates and recession worries, lifting safe-haven assets.

All three major US stock indexes plunged deeply into the red following yesterday’s aggressive rate hike from the Federal Reserve. Desperate to contain the strongest inflation in 40 years, the Fed lifted rates by three-quarters of a point, the most in 22 years, and promised more to come.

The Dow and S&P 500 dropped 2.4% and 3.3%, respectively, while the Nasdaq plunged 4.1%.

As rising interest rates slow the economy, corporate earnings come under pressure from higher costs for development and debt service. Nearly 70% of economists surveyed recently by the National Bureau of Economic Research say the US economy will enter recession next year.

Adding to risk-off sentiment, factory activity in the Philly Fed region fell into contraction for the first time since May 2020, in the depth of the pandemic. US housing starts plummeted 14.4% in May, also to a two-year low.

Benchmark 10-year Treasury yields retreated to 3.2% as investors rushed into the perceived safety of government debt. Falling yields support gold by decreasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

The dollar tumbled 1.3% against major rivals, especially the safe-haven Swiss franc, after the Swiss National Bank announced a surprise half-point interest rate increase. It was the first hike by the SNB in 15 years. A weaker dollar supports gold and other commodities by making them less expensive in other currencies.

Also supporting gold, oil prices rose 1.5% to more and $117 per barrel after the US announced new sanctions against Iran. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

The other precious metals were also higher, with silver rising 2.2% while platinum added 2.9% and palladium 1.8%.

At the Comex close: August gold gained $30.30 to $1,849.90; July silver climbed 46 cents to $21.89; July platinum picked up $26.50 to $951.10; and September palladium added $32.20, to $1,866.50 an ounce.