Gold Prices Surge As Dismal US GDP Figures Stoke Fears About Slowing Economy
Gold prices rebounded sharply Friday morning after US government data showed a much smaller than expected rise in GDP, raising fresh concerns about the health of the world’s largest economy.
Gold for December delivery, the most actively traded futures contract, rose 1.2% to $1,357.50 a troy ounce on the COMEX division of the New York Mercantile Exchange.
The yellow metal is looking to close a volatile week in positive territory. The futures price was on pace for a weekly decline before reversing sharply higher after US GDP data surprised to the downside.
Gross domestic product expanded at a disappointing 1.2% annualized rate in the second quarter, following a downwardly revised gain of 0.8% in January-March, Commerce Department data showed Friday. The median forecast of economists called for a 2.6% increase.
The sharp slowdown in economic growth through the first half of the year complicates the Federal Reserve’s outlook. It also suggests that interest rates will remain near rock bottom for the foreseeable future.
The likelihood of a 2016 rate increase has declined to around 33%, according to the CME Fed Fund futures prices, which express traders’ views on changes in US monetary policy.
Dismal GDP figures sent the US dollar to nearly one-month lows Friday. The dollar index fell 1.2% to 95.57.
The dollar began to backtrack overnight after the Bank of Japan (BOJ) announced modest stimulus measures at its latest policy meeting. The USD/JPY was the worst-performing dollar pair on Friday, having declined over 3% to the lowest level since the Brexit vote in June.
Precious metals were higher across the board Friday. Silver futures advanced 0.7% to $20.33 a troy ounce. Spot platinum, the price paid for immediate settlement, surged 1.3% to $1,148.50 a troy ounce – a more than one-year high.
Macroeconomics will be the main drivers of gold and other precious metals next week. The Bank of England will release the minutes of its July meetings on Thursday, which could provide clues about the central bank’s intent to loosen monetary policy next month.
The Commerce Department will also report on July nonfarm payrolls on Friday.
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Written exclusively for Gold-Eagle.com by Paul Rosenberg, market analyst for EconomicCalendar.com
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Paul Rosenberg is a market analyst for EconomicCalendar.com with over seven years of experience trading FOREX and 20 in the financial industry. Paul specializes in Indices, Commodities and FOREX. He provides actionable analysis combining both the Fundamental and Technical aspects of an asset.
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