Gold News & Info

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 1% to close under $1,814 as hot wholesale inflation reinforced expectations that the Fed will aggressively raise interest rates this week. It was the metal’s lowest finish in a month.

The Producer Price Index rose another 0.8% in May, signaling that the worst inflation in 40 years is unlikely to subside anytime soon. Higher gas prices accounted for much of the increase, but the cost of autos and auto parts, steel, transportation, and some food items also jumped.

The strong rise in wholesale prices compounds the pain of last Friday’s unexpectedly hot CPI, which showed consumer prices rising 1% in May for a year-over-year inflation rate of 8.6%. Rising wholesale inflation tends to trickle down into higher costs to consumers within several months.

Benchmark 10-year Treasury yields touched 3.5%, the highest level since 2011, as investors speculate that the Fed will be far more aggressive in raising interest rates to combat inflation. According to the CME FedWatch, the probability of a 75-basis point hike at this week’s Fed meeting is now 94%, up from just 4% one week ago.

Higher inflation typically supports gold in its traditional role as inflation hedge, but higher yields can create headwinds for the metal in the short term by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

The Fed’s decision is complicated by the growing sense that the economy may tip toward recession if rate hikes are too aggressive. Small businesses are now the most pessimistic they’ve been in 48 years, according to the NFIB. Nearly 70% of the economists surveyed by the National Bureau of Economic Research say the US economy will enter recession next year.

The dollar also strengthened on the hawkish rate view, adding 0.4% to reach a fresh 20-year high against major rivals. A stronger dollar weighs on gold and other commodities by making them pricier overseas.

The other precious metals were mostly lower, with silver and platinum dropping 1.4% and 2.3%, respectively, while palladium inched up 0.1%.

At the Comex close: August gold fell $18.30 to $1,813.50; July silver lost 30 cents to $20.95; July platinum shed $21.60 to $910.70; and September palladium picked up $1.80 to $1,780.20 an ounce.