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Gold resumes upside on weak final Q3 GDP data, US core PCE eyed


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  • Gold price picks strength after downbeat final Q3 GDP data, US PCE data still awaited
  • A sticky US core PCE report may dampen investors’ short-term appeal for Gold.
  • Fed Harker said that rate cuts won’t come sooner that what the market is expecting.

Gold price (XAU/USD) attempts to resume upside journey after the United States Bureau of Economic Analysis (BEA) reported in its final estimate report that the economy grew by 4.9% against estimates and the former reading of 5.2%. This has brought a sharp sell-off in the US Dollar, which has already been on the back foot due to soaring expectations of rate cuts by the Fed. Few investors still believe that the US central bank is not going to lower rates sooner amid the resilience of the US economy.

Philadelphia Fed Bank President Patrick Harker also pushed back expectations of upcoming cuts in borrowing costs. Harker said he sees a soft landing, but warned that unemployment could rise moderately. 

Further action in the Gold price will be driven by the US core Personal Consumption Expenditure Price Index (PCE) for November, due on Friday. A report signalling that inflation remains sticky could slow down a broader rally in the Gold price as it would likely force Federal Reserve (Fed) policymakers to opt for a more restrictive monetary policy stance.

Daily Digest Market Movers: Gold price gathers strength for fresh upside after downbeat Q3 GDP 

  • Gold price finds strength as final reading of Q3 Gross Domestic Product (GDP) has landed at 4.9%, lower than expectations and the former print of 5.2%.
  • Initial Jobless Claims (IJC) for the week ending December 15 were 205K, little higher than the prior reading of 203K but remain lower than expectations of 215K.
  • Meanwhile, investors await the United States core PCE Price Index data for November, which is scheduled for Friday.
  • Fed’s preferred inflation measure is likely to provide clues over how long the central bank is required to keep interest rates in a restrictive trajectory.
  • Themonthly core PCE price index is expected to increase at a steady pace of 0.2%. On an annual basis, PCE inflation is expected to  decelerate to 3.3% from 3.5%.
  • A sticky underlying inflation report may trim expectations of early rate cuts by the Federal Reserve and compel policymakers to keep interest rates in the restrictive trajectory for longer until the return of inflation to 2% is confirmed.
  • This could also improve appeal for the US Dollar and benefit irisk-sensitive assets.
  • In the Summary of Economic Projections (SEP) released last week, all Fed policymakers favoured no further rate hikes and the majority of members supported a decline in borrowing costs by 75 basis points (bps) in 2024.
  • Atlanta Fed Bank President Raphael Bostic, New York Fed Bank President John Williams, and Philadelphia Fed Bank President Patrick Harker showed their openness to lowering interest rates, but said that an immediate cut isn’t expected. 
  • Harker said  that one major reason to cut interest rates next year is that businesses are struggling to augment higher interest obligations.
  • While asked about the possibility of a soft landing, Harker said that it is quite possible, but warned that the Unemployment Rate could rise moderately. A ‘soft landing’ is a scenario in which inflation returns to 2% without triggering a recession
  • In addition to the US core PCE price index data, investors will also focus on the Durable Goods Orders data for November, also due Friday. 
  • Fresh orders for Durable Goods are expected to increase by 2.2% against a decline of 5.4% a month earlier. A higher-than-anticipated increase in new orders would provide some cushion to the US Dollar.
  • Deepening hopes of early cuts in borrowing costs by the Fed have weighed down US Treasury yields further. The 10-year US Treasury yields have dropped to near 3.87%.

Technical Analysis: Gold price eyes upside above $2,040

Gold price continues to trade sideways below $2,040.00. The precious metal trades inside Tuesday’s range amid the absence of a potential trigger. The broader appeal for Gold is quite bullish as short-to-long-term daily Exponential Moving Averages (EMAs) are sloping higher. 

GDP FAQs

A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022.
Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.

A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency.
When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.

When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.