AGE Daily Gold Update

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

9/19/2024: Gold extends rate-cut rally

Source: Bill Musgrave, American Gold Exchange

Austin — New York spot gold gained 0.7% to close at $2,588 despite an uptick in Treasury yields and rallying equities as investors digested yesterday's jumbo rate cut from the Fed. Silver climbed 2.5% to finish at $31.09 an ounce.

The Fed launched its first easing cycle in four years with an oversized half-point cut in its benchmark rate, effectively declaring victory over inflation. The FOMC forecasts another 50 basis points in cuts by year end. Fed fund futures markets, which put the odds of the jumbo cut at 65% before the meeting, anticipate closer to 75 basis points in reductions by December.

The Fed's dovish pivot is widely seen as bullish for gold, putting downward pressure on Treasury yields and the dollar while boosting alternative stores of value.

Following the rate cut, Citi Research forecast gold at $2,600 by the end of 2024 and $3,000 by the end of 2025. Analysts at USB, in a note to clients today, are targeting $2,700 by mid-2025.

Wall Street rallied sharply as falling interest rates stoked appetite for risk. The Dow and S&P 500 surged 1.5% and 1.9%, respectively, while tech-heavy Nasdaq jumped 2.8%. Often heavily reliant on research and development, tech firms are extra-sensitive to interest rates because their earnings are projected far into the future, requiring them to capitalize via borrowing.

Reinforcing investor confidence, the Philly Fed manufacturing gauge rose from contraction to expansion in September. In addition, first-time jobless claims fell 12,000 to 219,000 last week, the lowest level since May.

Capping gold's gains, benchmark 10-year Treasury yields rose near 3.75% as traders shifted from safe-havens to risk assets. Higher yields pressure gold by increasing the opportunity cost for holding it instead of bonds.

Platinum and palladium advanced 2% and 3%, respectively.

At the New York spot close: gold gained $17.30 to $2,588; silver rose 75 cents to $31.09; platinum picked up $19.60 to $994.40; and palladium climbed $32.10 to $1,098.60 an ounce.

9/18/2024: Gold gains after jumbo rate cut

Source: Bill Musgrave, American Gold Exchange

Austin — New York gold rose 0.3% to close near $2,571 before the Fed's momentous decision on interest rates. Gold futures then jumped as high as $2,610 in after-hours trade after the central bankers delivered a jumbo rate cut, pressuring the dollar and lifting alternative stores of value. Silver slid 1.1% to finish at $30.34 an ounce.

At the end of its two-day meeting on monetary policy the Federal Reserve cut interest rates by 50 basis points, the most in 16 years. It was a bold move, one that had been discounted by most economists leading up to the meeting, given the Fed's history of taking small steps.

In the accompanying statement, the FOMC said it has "greater confidence that inflation is moving sustainably toward 2%. The vote was nearly unanimous, with only a single member calling for a quarter-point cut. Policy makers anticipate another half-point in reductions before year end, according to their forecasts.

The dollar lost 0.5% against major rivals after the rate decision, lifting gold by making it less expensive in other currencies.

Most analysts see the Fed's pivot as bullish for gold as it lowers Treasury yields and weakens the dollar. Aakash Doshi, head of commodities, North America at Citi Research is forecasting gold at $2,600 by the end of 2024 and $3,000 by the end of 2025.

Platinum and palladium fell 0.8% and 3.4%, respectively.

At the New York spot close: gold gained $6.40 to $2,570.70; silver slid 34 cents to $30.34; platinum lost $8 to $974.80; and palladium retreated $39.20 to $1,066.50 an ounce.

9/17/2024: On slips on data before Fed

Source: Bill Musgrave, American Gold Exchange

Austin — New York spot gold slipped 0.6% to close near $2,565 as Treasury yields and the dollar bounced from 2024 lows after upbeat US data damped expectations for a jumbo rate cut from the Fed. Silver edged down 0.1% to finish at $30.73 an ounce.

US retail sales rose 0.1% in August, more than forecast, suggesting that the economy remains on a reasonably solid footing. Retail sales constitute around one-third of consumer spending, which in turn accounts for roughly 70% of GDP.

Industrial production also rose more than expected, adding 0.8% last month. But most of the increase came from auto manufacturing. Otherwise, output rose just 0.3%, indicating that the industrial side of the economy remains in a slump.

Benchmark 10-year Treasury yields rose on the data as investors speculated that the Fed may be less inclined to slash interest rates by 50 basis points when its two-day meeting concludes tomorrow. Higher yields weigh on gold by increasing the opportunity cost for holding it instead of bonds.

Tracking higher with yields, the dollar added 0.2% against major rivals but is still hovering near the lowest levels of the year. A stronger dollar pressures gold and other commodities by making them more expensive in other currencies, limiting overseas demand.

Platinum slid 0.5% while palladium rose 3.5% on expectations that Russia, a major producer, will alter its export policies to penalize the West for supporting Ukraine.

At the New York spot gold close: gold slipped $16.10 to $2,564.70; silver dipped 4 cents to $30.73; platinum shed $5.40 to $982.80; and p0alladium picked up $38.20 to $1,120.80 an ounce.

9/16/2024: Gold channels ahead of Fed

Source: Bill Musgrave, American Gold Exchange

Austin — Consolidating last week's 3.5% rally, gold inched down less than $1 to hold above $2,580 despite falling Treasury yields and a weaker dollar as gold traders treaded water before this week's Fed meeting. Silver added 0.2% to finish at $30.77 an ounce.

The question is not whether the Fed will reduce interest rates at its upcoming meeting but by how much. In most cases, barring a crisis, the Fed likes to cut rates by small increments like a quarter-point. But while the economy and the labor market are both clearly cooling, neither is at risk of freezing solid at this point.

Many on Wall Street therefore dismiss the likelihood of a bigger cut in favor of a sustained series of small ones. A speculative consensus is forming on quarter-point cuts at each of the next seven meetings, dropping rates by 175 basis points by next summer, according to MarketWatch.

But Fed fund futures traders apparently disagree, lifting the odds of a half-point cut to 67% today, up from under 50% on Friday. The shift began after the Wall Street Journal and Financial Times reported late last week that a 50 basis-point rate cut is back on the table.

Benchmark 10-year Treasury yields retreated to a 13-month low as bond traders prepare for substantially lower interest rates in coming months. The dollar also fell against major rivals, with the dollar index hitting the lowest level of the year.

Falling interest rates are bullish for gold because they weaken the dollar, making gold cheaper overseas. Lower rates also reduce bond yields, thereby decreasing the opportunity cost for holding gold instead of bonds.

Platinum fell 1.8% while palladium rose 0.6%.

At the New York spot close: gold dipped 90 cents to $2,580.40; silver rose 7 cents to $30.77; platinum shed $18.60 to $988.20; and palladium added $6.60, to $1,082.60 an ounce.

9/13/2024: Gold surges to another record

Source: Bill Musgrave, American Gold Exchange

Austin — New York spot gold rallied another 1.2% to close at a new record high above $2,581 as Treasury yields and the dollar fell on speculation that the Fed may deliver a jumbo rate cut when it meets next week. Gaining 3.5% for the week, gold has now risen nearly 25% for the year, its strongest since 2020. Silver added 3.2% to finish at $30.70, scoring a weekly rise of 10.4%.

Following this week's soft CPI and PPI reports, which confirmed consumer and wholesale prices are in a solidly deflationary trend, the markets are increasingly certain that the Fed is entering a sustained and perhaps aggressive phase of monetary easing.

The Wall Street Journal and Financial Times reported late yesterday that a 50 basis-point rate cut is back on the table for next week's Fed meeting. Former New York Fed president William Dudley said today that current rates are 150 to 200 basis points too high, and the case is strong for cutting by a half-point now.

Fed fund futures traders increased their bets on a half-point rate cut this month, raising the odds to 45%, up from 28% yesterday. A quarter-point all but guaranteed. By year end, the central bank is now projected to cut 120 basis points.

Falling interest rates are bullish for gold because they weaken the dollar, making gold cheaper overseas. Lower rates also reduce bond yields, thereby decreasing the opportunity cost for holding gold instead of bonds.

Benchmark 10-year Treasury yields slid to a new 16-month low on the shifting rate view, while the dollar lost ground against major rivals.

Platinum picked up 2.5% today and 9.6% this week. Palladium added 2% for a whopping 20% rise this week, propelled by Russian threats to change export regulations to penalize the West for supporting Ukraine. Russia is a leading producer of PMGs.

At the New York spot close: gold gained $30.10 to $2,581.30; silver surged 96 cents to $30.70; platinum picked up $24.60 to $1,006.80; and palladium added $20.80 to $1,074.60 an ounce.

9/12/2024: Gold bags new record after PPI

Source: Bill Musgrave, American Gold Exchange

Austin — New York spot gold surged 1.6% to close above $2,551, a new record high, after another round of soft inflation data reinforced the prospect of monetary easing by the Fed. Silver rallied 4.1% to finish at $29.74 an ounce.

Wholesale inflation as measured by the producer price index rose 0.2% in August, pulling the 12-month rate down to 1.7% from 2.1% in July. It was the lowest annual rate in six months. Wholesale inflation is typically a harbinger of future consumer inflation.

Coming one day after the CPI showed similar weakening, the data confirms a multi-month deflationary trend that correspondents to a gradual slowing in the labor market and overall economy—precisely what the Fed was hoping for when it raised interest rates to the highest level in more than 20 years.

Fed fund futures traders have fully priced in a quarter-point reduction when the central bank meets next week, with further cuts of at least as much in November and December. The odds that the Fed will cut by a full 1% by December have risen to 85%, according to CME FedWatch.

The dollar fell 0.4% against major rivals led by the euro, which rose after the ECB cut its rate by a quarter-point, but ECB chief Christine Lagarde pushed back on the idea of another cut in October. A weaker dollar boosts gold and other commodities by making them cheaper in other currencies.

Gold was also supported by sharply higher oil prices. US benchmark WTI crude added 2.7% to more than $69 per barrel after Hurricane Francine interrupted oil and gas production in the Gulf of Mexico. Gold often trades in sympathy with oil.

Platinum and palladium rose 2.7% and 4.3%, respectively, after Putin threatened to change export regulations to penalize the West for supporting Ukraine. Russia is a leading producer of PMGs.

At the New York spot close: gold surged $39.10 to $2,551.20; silver rose $1.18 to $29.74; platinum picked up $26 to $982.20; and palladium advanced $43.260 to $1,053.80 an ounce.

9/11/2024: Gold firm after mixed CPI data

Source: Bill Musgrave, American Gold Exchange

Austin — New York spot gold was nearly flat, edging down 20 cents to hold above $2,512, after mixed CPI data reduced the likelihood that the Fed will deliver an oversized reduction in interest rates next week. Silver rallied 1.1% to finish at $28.56 an ounce.

Consumer prices rose 0.2% in August, as forecast, pulling the 12-month inflation rate down to 2.5%, the lowest in 3.5 years, from 2.9% in July. Over the past three months prices have risen an average of 1.1% annualized, signaling that falling consumer inflation is a solid trend.

The CPI data also carried a caveat. Core prices, factoring out food and energy, rose more than forecast at 0.3%, suggesting some stickiness remains in areas like shelter, auto insurance, and air travel.

Fed fund futures traders took the mildly elevated core CPI to mean the Fed is less likely to cut rates in a big way this month. CME FedWatch puts the odds of a half-point reduction at just 13%, down from 39% before the data. A rate cut of at least a quarter-point remains fully priced in.

A smaller rate cut takes some wind out of gold's sails in the short term. But the established trend of deflation means rates are coming down, if a bit more gradually, which will continue to support higher gold prices.

Benchmark 10-year Treasury yields inched up slightly but hovered near 15-month lows. The dollar was little changed.

Platinum rose 1.3% while palladium jumped another 5.2% after Russia, the leading producer, threatened to change export regulations to penalize the West for supporting Ukraine.

At the New York spot close: gold edged down 2o cents to $2,512.10; silver rose 31 cents to $28.56; platinum picked up $11.90 to $956.20; and palladium surged $50.20 to $1,010.20 an ounce.

9/10/2024: Gold extends rise before CPI

Source: Bill Musgrave, American Gold Exchange

Austin — New York spot gold gained 0.4% to close above $2,512 as Treasury yields eroded further ahead of tomorrow's CPI data for August. The metal has risen 21% so far this year. Silver edged down 0.1% to finish at $28.26 an ounce.

All eyes will be on the release of the consumer price index data on Wednesday for clues about the size of the coming rate cut from the Fed. Most forecasts expect consumer inflation to have risen 0.2% for the month of August, the same as July, which would lower the 12-month rate to 2.6% from 2.9% last month.

If the CPI print comes in lower than forecasts, the odds of a jumbo rate cut when the Fed meets next week will increase. Currently, Fed fund futures trading has fully priced-in at least a quarter-point reduction, with the chances of a half point standing at 33%, up from 29% yesterday, according to CME FedWatch. Either way, it will be the first rate cut in four years.

In a new Reuters poll of US economists, most expect a quarter-point cut at each of the Fed's three remaining policy meetings this year, bringing the benchmark overnight interest rate down to 4.5% to 4.75% from its present 5.25% to 5.5%.

Benchmark 10-year Treasury yields fell under 3.7% for the first time in 15 months as investors prepared for lower interest rates and a slowing economy. Falling yields support higher gold prices by reducing the opportunity cost for holding it instead of bonds as a safe-haven asset.

The dollar was virtually flat, edging up less than 0.1% against major rivals as the yuan weakened after China's imports missed forecasts and grew just 0.5%.

Platinum dipped 0.3% while palladium jumped nearly 4%. At the New York spot close: gold gained $10.50; silver dipped 3 cents to $28.26; platinum shed $2.60 to $944.30; and palladium rose $36.70 to $973.50 an ounce.

9/9/2024: Gold rises ahead of CPI, PPI

Source: Bill Musgrave, American Gold Exchange

Austin — New York spot gold gained 0.3% to close near $2,502 despite an uptick in the dollar as traders digested Friday's mixed jobs report and await consumer and wholesale inflation data this week. Silver climbed 1.7% to finish at $28.29 an ounce.

The government's nonfarm payrolls report tallied 142,000 jobs added in August, fewer than forecast, and July's total was revised lower to 89,000. But the unemployment rate ticked down to 4.2% from 4.3% in July, suggesting that the labor market is cooling slowly.

Separately, a new government survey revealed that full-time work is getting harder to find. The number of people working full-time plunged by 1.5 million over the past 14 months while part-timers grew by 2 million. The shift from full to part time was the biggest since the financial crisis in 2008.

Still, the mixed nonfarm payrolls data has lowered expectations that the Fed will deliver an oversized rate cut when it meets next week. A quarter-point cut remains fully priced in, but the odds of a half-point reduction have fallen to 29% from nearly 50% last week, according to CME FedWatch.

The August CPI and PPI releases, scheduled for Wednesday and Thursday, respectively, should give further clarity on the size of the rate cut.

Benchmark 10-year Treasury yields dropped to just above 3.7%, the lowest level in more than a year, on looming rate cuts and a broad slowdown in economic activity. Falling yields lift gold by decreasing the opportunity cost for holding it instead of bonds for safety.

Capping gold's gains, the dollar bounced 0.4% higher on diminished bets that the Fed will cut by half a point. A rising buck makes gold more expensive in other currencies.

Platinum rose 3.1% and palladium 4.5%.

At the New York spot close: gold gained $8.30 to $2.5011.80; silver rose 48 cents to $28.29; platinum picked up $28.20 to $946.90; and palladium advanced $40.50 to $936.80 an ounce.

9/6/2024: Gold slides on mixed jobs report

Source: Bill Musgrave, American Gold Exchange

Austin — New York spot gold slid 0.7% to close under $2,494 after government data showed the labor market cooling at a gradual rate, diminishing expectations of a jumbo rate cut from the Fed. The metal was virtually unchanged for the week. Silver lost 3.2% for the day and week, finishing at $27.81 an ounce.

The US economy added 142,000 jobs in August, according to the Labor Department's nonfarm payrolls report, fewer than forecast. Totals for July were revised lower to 89,000. But the unemployment rate ticked down to 4.2% from 4.3% in July, suggesting that the labor market is cooling at a measured pace.

The mixed jobs report shifted rate cut expectations as investors had been hoping for data that would lock in a half-point rate cut when the Fed meets later this month. While a quarter-point reduction remains fully priced in, Fed fund futures trading has dropped the odds of a half-point cut to 31%, down from 49% earlier this week.

The dollar rose 0.2%, pressuring gold and other commodities by making them more expensive in other currencies. But Benchmark 10-year Treasury yields continued to erode slightly as investors shed equities for bonds.

Platinum fell 1.2% for a weekly decline of 1.5%. Palladium fell 4.1% today and 6.1% this week.

At the New York spot close: gold slipped $17.90 to $2,493.50; silver shed 91 cents to $27.81; platinum fell $11.60 to $918.70; and palladium declined $38.40 to $896.30 an ounce.