Gold News & Info

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 1% in choppy trade to close under $1,933 after Fed Chair Jerome Powell announced a major new policy framework, as expected, but did not signal other forms of additional easing. The metal swung between gains and losses of 2% as gold traders shifted from bullish bids to profit-taking after yesterday's 1.5% rise.

At the virtual Jackson Hole conference, Powell unveiled the Fed's new approach to managing inflation and unemployment, the adoption of an "average inflation target." The result of two years of research, it is the first substantial change to the Fed's monetary policy approach since 2012.

The central bank will now allow inflation to run well above its 2% target for extended periods to offset stretches of inflation below the target. The intention is to create more jobs before cooling the economy with higher rates.

In effect, the new framework means interest rates and bond yields will remain lower for longer, developments that are bullish for gold and bearish for the dollar in the longer term.

When other major central banks begin tightening their monetary policies to choke off inflation, the Fed will lag, shifting international rate differentials out of the dollar's favor. A weaker dollar supports gold and other commodities priced in it for global trade by making them less expensive in other currencies.

In addition, lower rates mean lower bond yields, which reduce the opportunity cost of holding the metal rather than bonds as a safe-haven asset. And finally, higher inflation is likely to increase demand for gold in its traditional role as a hedge against inflation and currency debasement.

Gold quickly jumped more than $40 on the Powell announcement for just these reasons, rising to an intraday high of $1,987. But with no other new forms of monetary easing unveiled, traders quickly took short-term profits from the surge, which came atop yesterday's 1.5% rally in anticipation of this policy announcement.

Rising risk appetite also undercut gold's early rise. The Dow rose nearly 1% and the S&P 500 added 0.6%, led by rate-sensitive financial stocks that will benefit from the new framework. The dollar was little changed.

The other precious metals were also lower, with silver falling 1.5% after yesterday's 4.5% rally while platinum and palladium both fell 1%.

At the Comex close: December gold dropped $19.90 to $1,932.60; September fell 42 cents to $27.03; October platinum slid $11.70 to $928.10; and December palladium contract lost $22.40 to $2,190.50 an ounce.