Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold surged 1.8% to close near $1,809 as upbeat economic prospects stoked worries about higher inflation while a weaker dollar lifted demand for alternative stores of value. It was the metal's highest finish in a week.

With the Biden administration's $1.9 trillion stimulus package working its way through Congress, and with COVID-19 vaccinations picking up steam at home and abroad, economists increasingly anticipate that the recovery will accelerate in coming months. Consumer, wholesale, and import prices have all risen sharply in the past month as the economy regains its footing.

Reinforcing this optimistic view of the economy, the Conference Board reported its index of leading indicators rose in across all sectors in January, posting its third straight monthly increase.

Bond prices continue to deteriorate, lifting yields, as traders expect faster growth to stimulate higher inflation. Benchmark 10-year Treasury yields rose to nearly a one-year high and 30-year TIPS, which offer inflation-adjusted yield, turned positive for the first time since June.

Rising bond yields can create headwinds for gold by increasing the opportunity cost for holding the metal, which offers no yield. But the rising inflation expectations that are driving bond yields also support a higher gold price as investors seek out long-term stores of value. Gold is widely viewed as a hedge against inflation and currency devaluation.

Also helping gold, risk appetite lessened as inflation and rising bond yields amplify concerns about excessive stock market valuations. The Nasdaq tumbled 2.2% as investors rotated away from high-flying tech stocks.

The dollar fell 0.4% against major rivals on improving outlooks in European economies. A falling dollar supports gold and other commodities by making cheaper in other currencies.

And finally, oil rallied more than 4.1% on speculation that Texas production will be limited by last week's crippling freeze. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

The other precious metals were mixed, with silver jumping 2.4% while platinum lost 1.2% and palladium added -.6%.

At the Comex close: April gold gained $31.20 to $1,808.60; March silver climbed 66 cents to $27.92; April platinum dropped $10.80 to $1,277.40; and March palladium rose $22.90 to $2,384 an ounce.