AGE Daily Gold Update

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

6/15/2021: Gold falls to one-month low

Source: Bill Musgrave, American Gold Exchange

Austin — Gold fell 0.5% to close under $1,857 on higher wholesale inflation and the possibility of a hawkish update on monetary policy when the Fed concludes its two-day meeting tomorrow. It was the metal's lowest finish in a month.

The Producers Price Index jumped another 0.8% in May for its fifth straight monthly rise as the cost of raw materials continue to be impacted by global supply-chain issues. The wholesale inflation rate climbed to 6.6% for 12 months, the highest reading since the index was reconfigure in 2009.

Inflationary pressures will occupy the Fed as it meets today and tomorrow to discuss its dual mandate of maximum employment and price stability. The central bank has been adamant thus far in asserting that such bursts of inflation will be transitory, and no cause for altering monetary policy until the economy fully recovers.

Nonetheless, some traders are speculating that the Fed will blink and begin talking, at least, about tapering its $120 billion-per-month program of quantitative easing. Tantamount to printing money, QE has supported higher gold prices by cheapening the dollar and keeping bond yields low.

Higher inflation is typically supportive of higher gold prices in the longer term because investors seek it as a hedge against loss of purchasing power. But in the shorter term, hawkish comments from the Fed could push yields and the dollar higher, eroding the gold price further.

Meanwhile, retail sales fell 1.3% in May as the cash provided by government stimulus programs dried up. And the Empire State Manufacturing index slowed in June on supply-chain disruptions. And, separately, industrial production rose 0.8% in May and strong gains in auto production.

Treasury yields pulled back, with benchmark 10-year yields falling below 1.5%, as bond traders weighed the softer economic data against the small likelihood of tighter monetary policy. Falling yields are good for gold because they reduce the opportunity cost for holding it instead of bonds.

The dollar edged up to a one-month high on expectations of taper talk, however, pressuring gold and other commodities priced in it for global trade by making them more expensive in other currencies.

The other precious metals were mostly lower, with silver and platinum dropping 1.2% and 1.4%, respectively, while palladium picked up 0.3%.

At the Comex close: August gold dropped $9.50 to $1,856.40; July silver lost 35 cents to $27.69; July platinum shed $16.70 to $1,148.60; and September palladium added $8.20, to $2,764.80 an ounce.