Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinNew York spot gold surged another 1.6% to close at a new all-time high above $2,462, driven by growing expectations that a cooling economy and falling inflation will spur the Fed to multiple rate-cuts this fall. Silver jumped 1.7% to finish at $31.20 an ounce.

After last Fridays weaker-than-expected CPI report showed consumer inflation falling to 3% for the first time in a year, a chorus of Fed officials have voiced their belief that the conditions have been met for reducing interest rates.

Fed Chair Jerome Powell said yesterday that three straight months of falling inflation add somewhat to confidence that inflation is falling sustainably. San Francisco Fed Bank President Mary Daly also said confidence is growing that inflation is heading toward the 2% goal. Chicago Fed President Austan Goolsbee said the falling CPI is what the path to 2% looks like.

Fed fund futures traders are now pricing in a September rate cut of at least 25 basis points with 99.8% certainty, according to CME FedWatch. In addition, the odds of three quarter-point cuts by December have risen to more than 50%, and a total of five or six cuts are now expected by next June.

This is a radical change from just a month ago, when traders were uncertain whether any reduction would be forthcoming this year.

Falling rates support gold by weakening the dollar and lower yields, boosting demand for alternative stores of value. The metal has now climbed nearly 20% this year after adding 13% last year.

Benchmark 10-year Treasury yields retreated further under 4.2% on the dovish rate view, boosting gold by decreasing the opportunity cost for holding it instead of bonds for safety.

Gold is also gathering support from safe-haven inflows after the assassination attempt of Donald Trump last weekend fueled political uncertainty and volatility in the markets.

Platinum picked up less than 0.1% while palladium rose 0.6%.

At the New York spot close: gold surged $39.50 to $2,462.40; silver climbed 52 cents to $31.20; platinum added 80 cents, to $1,00.73; and palladium rose $5.60 to $956.80 an ounce.