Daily Gold Update

Source:Matt Warden, American Gold Exchange

AustinGold rallied 0.9% to close the day at a new 6-year high of $1,527.80 after the closely followed measure of the U.S. Treasury yield curve inverted — a classic recession indicator. The 30-year U.S. Treasury note yield hit a new low as evidence of a slowdown in global economic growth continued to mount.

The 3-month and 10-year U.S. Treasury note yield curves have been inverted since May of this year and reached the greatest inverted level since April 2007 this morning. Today the most significant measure of the yield curve — the difference between 2-year U.S. Treasury note and 10-year note yields — also inverted for the first time since May 2007. An inversion of 2-year and 10-year U.S. Treasury note yields have been a reliable indicator of impending recession, preceding each of the last seven recessions that have occurred in the past 50 years.

The yield on 30-year U.S. Treasury notes fell to a new record low today as well, moving as low as 2.016% and falling below the Federal Reserve's Effective Federal Funds (EFF) rate for the first time ever. The EFF rate is the interest rate banks charge each other for overnight loans to meet their reserve requirements. Unprecedentedly, it is now less expensive for banks to borrow money over a 30-year term than it is to borrow money overnight. The 10-year Treasury note yield also fell to a new 3-year low of 1.577%, honing-in on the all-time low of 1.44% set in 2016. As U.S. Treasury note yields decrease, demand for gold increases because the opportunity cost of owning gold, which provides no yield, is reduced.

Evidence of a global economic slowdown continues to mount with China reporting overnight factory output in June decelerated to a 17-year low and retail sales growth came in well below forecasts. Data out of Europe showed the eurozone economy slowed to a 0.2% growth rate in the second quarter, with Germany, the largest economy in the eurozone, reporting that their GDP contracted for the second time in four quarters, now on the verge of recession.

U.S. stock markets responded negatively to the day's news, with the Dow falling 3.05%, the S&P 500 down 2.93%, and the Nasdaq off 3.02%.

The other precious metals were mixed today: silver reigned, rallying an impressive 1.8%, while platinum and palladium were dragged lower by recession fears, falling 1.3% and 2.5%, respectively.

At the Comex close: December gold ended the day up $13.70, closing at $1,527.80 per ounce; September silver jumped 30 cents to $17.28 per ounce; October platinum fell $11.70 to $848.00 per ounce; September palladium dropped $35.10 to $1,416.40 per ounce.