Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold edged up less than 0.1% to close at $1,929.50 as higher oil prices and the Ukraine war drove demand for alternative assets despite hawkish comments about interest rates from Fed Chair Jerome Powell.

Powell told the National Association for Business Economics today that he is willing to move aggressively against inflation, taking "the necessary steps" to return to "price stability." These steps include half-point rate hikes at coming FOMC meetings and raising rates high enough to restrict economic growth, he said.

The Central Bank raised interest rates by a quarter-point last week and outlined a series of similar hikes to lift the overnight rate from near-zero, where it had been since the pandemic began, to 1.9% this year and 2.8% in 2023.

Benchmark 10-year Treasury yields pushed temporarily above 2.3% for the first time since May 2019 after Powell's statements, capping gold's gains by increasing the opportunity cost for holding it instead of bonds as a safe-haven assets.

But gold investors looked past Powell and yields to focus on the reason for his hawkish stance: the highest inflation rate in 40 years. The cost of living is widely expected to accelerate in coming months because of sharply higher oil and food prices as the war in Ukraine drags on.

Gold is sought by investors to preserve purchasing power in strongly inflationary times.

Global benchmark Brent crude surged 7.1% to more than $115 per barrel, the highest in almost two weeks, after the EU discussed joining the US and UK in boycotting Russian oil as punishment for its bloody invasion of Ukraine. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

Equities pulled back on the hawkish Powell rhetoric as traders begin to question whether sharply higher interest rates would snuff growth and tip the economy toward recession. The Dow lost 0.6% while the Nasdaq slid 0.4% and the S&P 500 was down 0.1%.

Bond traders echoed the recession concerns, narrowing the yield gap between 10-year and 2-year Treasurys to just 21 basis point. A flattening of the year curve like this typically reflects concerns about future growth. An inverted yield curve, when short-term Treasurys yield more than long-term, often foreshadows a recession within six to 24 months.

The other precious metals were also higher, with silver and platinum rising 0.9% while palladium climbed 1.8%.

At the Comex close: April gold added 20 cents, to $1,929.50; May silver gained 23 cents to $25.31; April platinum picked up $8.80 to $1,044.70; and June rose $44.30 to $2,537.30 an ounce.