Gold News & Info

Source:Bill Musgrave, American Gold Exchange

AustinGold tumbled 1.7% to close under $1,706 after hot wholesale inflation stoked expectations of big rate hikes from the Fed, lifting the dollar and undercutting alternative stores of value. It was the metal’s lowest finish in 15 months.

The Producer Price Index jumped 1.1% last month, pushing wholesale inflation to 11.3%, up from 10.9% in May. Most of the increase came from sky-high gasoline prices. The so-called core PPI, factoring out food and energy, rose just 0.3%. Wholesale inflation is a leading indicator of higher consumer prices to come.

Arriving one day after consumer inflation printed at an annualized 9.1%, the highest in 41 years, the sizzling PPI puts the Fed in the hot seat. It must act aggressively to bring down prices before they become entrenched, but big rate hikes also run the risk of tipping the economy into recession.

Recognizing the Fed’s dilemma, Fed Governor Christopher Waller pushed back on recent calls for a full 1% rate hike at the July meeting, saying 75 basis points is enough. Separately, St. Louis Fed President James Bullard also offered his support for the smaller increase.

Prior to these statements, Fed fund futures traders put the odds of a 1% hike at 80%, up from zero last week. Afterward, the odds fell to 44%.

Nonetheless, the dollar rallied another 0.6% against major rivals on the growing rate disparity between the US and major rivals. The yen fell to the lowest level since 1998. The euro dropped further below parity with the dollar to a new 20-year low.

While gold is often sought as a hedge against rising inflation, the metal comes under pressure as the dollar strengthens because it becomes more expensive in other currencies, which limits demand overseas.

The other precious metals were also sharply lower. Silver fell 5.1%; platinum dropped 2.5%; and palladium lost 3.7%.

At the Comex close: August gold futures lost $29.70 to 1,705.80; September silver plunged 97 cents to $18.23; October platinum futures shed $20.50 to $817.30; and September palladium dropped $73.30 to $1,898.10 per ounce.