Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

AustinNew York spot gold rallied another 1.2% to close at a new record high above $2,581 as Treasury yields and the dollar fell on speculation that the Fed may deliver a jumbo rate cut when it meets next week. Gaining 3.5% for the week, gold has now risen nearly 25% for the year, its strongest since 2020. Silver added 3.2% to finish at $30.70, scoring a weekly rise of 10.4%.

Following this week's soft CPI and PPI reports, which confirmed consumer and wholesale prices are in a solidly deflationary trend, the markets are increasingly certain that the Fed is entering a sustained and perhaps aggressive phase of monetary easing.

The Wall Street Journal and Financial Times reported late yesterday that a 50 basis-point rate cut is back on the table for next week's Fed meeting. Former New York Fed president William Dudley said today that current rates are 150 to 200 basis points too high, and the case is strong for cutting by a half-point now.

Fed fund futures traders increased their bets on a half-point rate cut this month, raising the odds to 45%, up from 28% yesterday. A quarter-point all but guaranteed. By year end, the central bank is now projected to cut 120 basis points.

Falling interest rates are bullish for gold because they weaken the dollar, making gold cheaper overseas. Lower rates also reduce bond yields, thereby decreasing the opportunity cost for holding gold instead of bonds.

Benchmark 10-year Treasury yields slid to a new 16-month low on the shifting rate view, while the dollar lost ground against major rivals.

Platinum picked up 2.5% today and 9.6% this week. Palladium added 2% for a whopping 20% rise this week, propelled by Russian threats to change export regulations to penalize the West for supporting Ukraine. Russia is a leading producer of PMGs.

At the New York spot close: gold gained $30.10 to $2,581.30; silver surged 96 cents to $30.70; platinum picked up $24.60 to $1,006.80; and palladium added $20.80 to $1,074.60 an ounce.