AGE Daily Gold Update

AGE Daily Gold Update presents a recap on today's action in the precious metals markets. View archives.

12/20/2024: Gold jumps on softer inflation

Source: Bill Musgrave, American Gold Exchange

Austin — New York spot gold jumped 1.4% to close near $2,629 as Treasury yields and the dollar retreated after the PCE index showed softer inflation in November, shifting the rate-cut calculus for 2025. Bullion still fell 0.9% for the week. Silver added 2% to finish at $29.66 but suffered a 3.4% weekly loss.

The personal consumption index rose merely 0.1% in November, the least in three months and half of most forecasts, breaking the gradual uptrend in inflation that has bedeviled the Fed since the summer. The so-called core rate, less food and energy, also rose just 0.1%. The PCE is the Fed’s preferred inflation gauge.

Commenting after the Fed’s rate cut earlier this week, Jerome Powell signaled a wait-and-see attitude toward further reductions, citing a rebound in inflation and still-strong job market. As a result, traders began pricing in just two cuts in 2025, with the second coming next December. The dollar and Treasury yields surged on the changed outlook, pressuring the gold price.

But today’s surprisingly soft PCE print shifted the rate view again. Fed fund futures now project another quarter-point cut in March rather than May, and the odds have increased for a third cut by December.

Benchmark 10-year Treasury yields pulled back from a six month high to just above 4.5%, boosting gold by decreasing the opportunity cost for holding it instead of bonds for safety.

The dollar dropped 0.7% against major rivals after hitting a two-year high yesterday, but still rose 0.7% on the week. Gold typically trades inversely with the buck because is denominated in dollars for overseas trade.

Gold’s sizable gains were capped by rekindled risk appetite. All three major US stock indexes jumped 1.5% after the PCE data on the renewed prospect of lower interest rates next year.

Platinum rose 1.4% today but still slipped 0.3% this week. Palladium added 3.1% on the day but lost 1% on the week.

At the New York spot close: gold gained $36.50 to $2,628.70; silver surged 57 cents to $29.66; platinum picked up $12.90 to $934.40; and palladium advanced $28.35 to $925.45 an ounce.