Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold futures surged 1.6% to close at a record high above $2,089 as comments by Fed Chair Jerome Powell reinforced expectations that the central bank is likely to cut interest rates in coming months. The metal rose 4.9% for the week on the increasingly dovish outlook.

In prepared remarks at Spellman College, Powell acknowledged that monetary policy has succeeded in slowing the economy as expected, and that the benchmark interest rate is already “well into restrictive territory.” He admitted that "the risks of under- and over-tightening are becoming more balanced,” suggesting that the most aggressive rate-hike cycle in a generation is likely over.

Coming on the heels of dovish comments by a series of regional Fed officials this week, the markets heard Powell’s words as reinforcing the prospect that rate cuts are on the way. Fed fund futures traders now put the odds of a March rate cut at 65%, up from 43% late yesterday.

Recent US economic data has supported the idea of a policy pivot. The Fed’s preferred inflation gauge, the PCE index, dropped to 3% for the past 12 months, the lowest reading since February 2021. Consumer spending weakened in October, rising a modest 0.2% after surging 3.6% during Q3. And the ISM reported manufacturing contracted for the thirteenth straight month.

Benchmark 10-year Treasury yields fell to 4.225% after Powell’s remarks, the lowest level in three months. Falling yields support gold by decreasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

Tracking lower with yields, the dollar slipped 0.3% to end lower for the third straight week. A weaker dollar boosts gold and other commodities by making them cheaper in other currencies, lifting overseas demand.

The other precious metals were mixed for the day and week. Silver added 0.8% today and a whopping 8% this week. Platinum picked up less than 0.1% for a weekly rise of 0.6%. Outlier palladium lost 1% today and 4.4% this week.

At the Comex close: February gold gained $32.50 to $2,089.70; March silver climbed 20 cents to $25.89; January platinum picked up 20 cents to $930.10; and March palladium shed $10 to $1,010.40 an ounce.