Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold surged 2.2% to close near $1,975 as the Fed's new policy of inflation averaging, announced yesterday by Fed Chair Jerome Powell, weakened the dollar and boosted alternative stores of value. The metal ended the week with a gain of 1.4%

Under the new framework, the Fed will let inflation run above its 2% target for extended periods to compensate for times of weaker inflation and promote higher levels of employment. Gold is often sought as a hedge against rising inflation and loss of purchasing power.

An important upshot of the Fed's new policy is that interest rates are likely to stay lower for longer. The central bank will stop increasing rates pre-emptively to prevent inflation from rising above 2%, as it has done for decades.

Low interest rates weaken the dollar by turning Forex investors toward other currencies in pursuit of higher yield. A weaker dollar, in turn, supports gold and other commodities priced in it for global trade by making them less expensive overseas.

The dollar fell sharply, losing 0.6% against major rivals, as traders speculated that interest rate differentials will increasingly disfavor the dollar when other central banks raise their rates to choke off inflation.

Also supporting gold prices, the new framework promises to keep bond yields low, thereby reducing the opportunity cost for holding the metal, which provides no yield itself, instead of bonds as a safe-haven asset.

The other precious metals were also higher for the day and week. Silver rose 2.2% for a weekly increase of 4%. Platinum added 1.3% for the day and 1.5% for the week. Palladium picked up 1.9% for weekly rise of 2.4%.

At the Comex close: December gold surged $42.30 to $1,974.90; December silver climbed 59 cents to $27.79; October platinum added $11.90, to $940; and December palladium picked up $41 to $2,231.50 an ounce.