Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 2.6% to close under $1,729, its lowest finish since last June, as the dollar rallied behind sharply higher bond yields, further pressuring alternative stores of value. The metal declined 2.7% this week and 6.6% this month for its biggest monthly drop in more than four years.

With the Biden administration's new $1.9 trillion pandemic relief bill on track for mid-March, traders are speculating that another staggering transfusion of easy money will drive inflation and risk assets much higher, potentially triggering early tightening from the Federal Reserve.

This so-called reflation trade has gripped the market in the past two weeks, driving yields on Treasury notes to the highest levels in more than a year yesterday. Higher yields pressure gold by increasing the opportunity cost for holding the metal instead on bonds as a safe-haven asset.

The Fed has repeatedly pushed back on the notion that rising inflation and bond yields will cause a shift in policy, saying the damaged economy and labor market will take years to heal. Nonetheless, traders are moving aggressively to price-in monetary tightening ahead of the central bank's forward guidance of holding interest rates near zero through 2023.

The dollar surged 0.8% against major rivals, lifted by rising bond yields and expectations of premature tightening. Higher interest rates lift the dollar by attracting Forex investors seeking higher returns. A stronger dollar, in turn, weighs on gold and other commodities by making the pricier in overseas markets.

The other precious metals were also lower for the session and mixed for the month. Silver shed 4.5% today and 1.8% in February. Platinum dropped 3.8% for the session but added 9.8% for the month. Palladium fell 4.2% today but rose 4.8% this month.

At the Comex close: April gold dropped $46.60 to $1,728.80; May silver lost $1.24 to $26.44; April platinum shed $46.20 to $1,185.30; and June palladium declined by $101.30 to $2,313.50 an ounce.