AGE Daily Gold Update

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

3/7/2023: Gold plunges on hawkish Powell

Source: Bill Musgrave, American Gold Exchange

Austin — Gold plunged 1.9% to close at $1,820 after Fed Chair Jerome Powell signaled the possibility of more aggressive monetary tightening in coming months, rallying the dollar and hammering alternative assets.

Speaking to the Senate Banking Committee, Powell said January's hot inflation and payrolls data indicate the Fed "a log way to go" in cooling the economy. As a result, the "ultimate level of interest rates is likely to be higher than expected," and "faster increases" may be coming.

Following Powell's remarks, Fed fund futures traders priced-in a 70% chance of a rate hike of 50 basis points at the Fed's mid-March meeting, up from 31% yesterday and 9% a month ago.

The dollar surged 1.2% to a three-month high after Powell's testimony, pressuring gold and other commodities by making them more expensive in other currencies, eroding demand overseas.

Rate-sensitive 2-year Treasury yields jumped above 5%, inverting the spread between 2-year and 10-year yields to minus 104.6 basis points, the most since September 1981. A deeply inverted yield curve is considered one of the bond market's most reliable gauges of impending recession.

Wall Street sold off on the combined threats of higher borrowing costs and the increased possibility that the Fed will overshoot and cause a recession. The Dow and S&P 500 fell 1.7% and 1.5%, respectively, while the Nasdaq slid 1.2%.

The other precious metals were sharply lower, with silver dropping 4.4% while platinum lost 4.3% and palladium shed 3.8%.

At the Comex close: April gold lost $34.60 to $1,820; May silver shed 94 cents to $20.20; April platinum fell $42.30 to $936.30; and June palladium gave up $53.90, to $1,370.60 an ounce.