Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold tumbled 1.7% to close under $1,649 as yields and the dollar surged on expectations that the Fed will continue to hike interest rates aggressively to combat stubborn inflation. The metal lost 3.5% for the week.

Surprisingly high inflation reports this week underscored the Fed's challenge in bringing down the hottest price increases in 40 years. Wholesale inflation, typically predictive of higher consumer prices to come, rose 0.4% in September for its first increase in three months.

Separately, core consumer prices jumped 0.6%, more than forecast, to a new 12-month peak last month. Core inflation is seen by the Fed as a more accurate gauge of inflation because it excludes volatile food and energy prices.

The high PPI and core CPI readings vanquished most hopes that the Fed could pivot away from delivering yet more aggressive rates hikes, risking stifled growth and perhaps recession. Currently at 3-3.5%, the Fed funds rate is now projected to surpass 5% in early 2023, up from zero earlier this year.

Retail sales were flat in September as higher prices and rising interest rates weighed on households. A big part of consumer spending, which constitutes around 70% of GDP, retail sales are considered a weathervane of economic health.

Benchmark 10-year Treasury yields pushed back above 4%, pressuring gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset. Two-year yields climbed above 4.5%, further inverting the yield curve and signaling growing anxiety over the longer-term prospects of the economy

The dollar rose 0.7% on the hawkish rate view and weakness in the UK pound and Japanese yen. A stronger dollar pressures gold and other commodities by making them more expensive in other currencies, thereby limiting demand.

The pound tumbled after the new UK finance minister was fired because of the financial turmoil caused by PM Liz Truss's plan, later rescinded, to financed huge tax cuts for top earners with new debt. The yen fell to a new 32-year low against the buck.

Plunging oil prices further weighed on gold. US benchmark WTI crude lost 4% for the session and 7.5% for the week on concerns that slowing global growth will weaken demand, especially in China. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

The other precious metals were also lower for the day and week. Silver fell 4.5% for a weekly loss of 10.8%. Platinum slid 0.2% today and 2.5% this week. Palladium shed 5.7% for a weekly decline of 8.9%.

At the Comex close: December gold fell $28.10 to $1,648.90; December shed 85 cents to $18.07; January platinum dropped $1.50 to $894.90; and December palladium lost $119.90 to $1,997.30 an ounce, its first finish under $2,000 since early September.