Gold News

Gold Prices "Hit by Strong Dollar" as US GDP Shows 4.0% Surge, FOMC Statement Due

GOLD PRICES slipped out of tight range below $1300 per ounce Wednesday lunchtime in London, touching a new low for this week at $1293 after key US data showed much faster growth than expected.
 
Asian and European stockmarkets had also held flat – as did major government bonds – but US equity futures pointed higher as the New York opening approached.
 
Wednesday's US GDP figures for the April-June quarter showed 4.0% annualized growth after Q1's surprise 2.9% drop.
 
The latest monetary policy statement from the Federal Open Market Committee of the US central bank was due later in the day.
 
"Gold has been pressured by a stronger US Dollar," says one commodities trading desk in a note.
 
"We may," adds London brokerage Marex Spectron, "see some small short-covering" by bearish traders closing their bets against gold prices "ahead of the FOMC release tonight.
 
"But on the whole I think we are in for a long and dull day."
 
Analyst Edward Meir at US brokers INTL FC Stone said overnight that today's GDP reading "will likely be more important" than the US Fed's statement, because "if growth substantially exceeds the 3.2% expected, we could see the Dollar move higher still."
 
The US Dollar today knocked the single Euro currency down to new 8-month lows beneath $1.34 on the FX market.
 
That buoyed gold prices for Eurozone investors near €967 per ounce after the US GDP data – down only 0.7% for the week so far against the Dollar price drop of 1.1%.
 
"Many market participants are clearly waiting for the outcome of the two-day meeting of the US Federal Reserve," says Eugen Weinberg, senior commodities analyst at Germany's Commerzbank.
 
But with Tuesday's US consumer confidence data hitting its highest level since 2007, "positive economic data could dampen demand for gold investment as a 'safe haven' on the one hand," says Weinberg, "and [also] fuel speculation about faster and sharper US interest rate hikes by the Fed on the other. 
 
"This is preventing gold prices from climbing."
 
Private-sector data on US jobs – widely seen as a forerunner of Friday's official non-farm payrolls report – meantime missed analysts' forecasts for July.
 
The ADP Payrolls Report said 218,000 net new jobs were added in the US this month, down from last month's 281,000 and below consensus expectations of 230,000.
 
Commodity prices slipped early Wednesday, holding crude oil near 2-week lows.
 
Silver tracked gold prices, also trading 0.8% down for the week so far at $20.58 per ounce.
 
Gold prices in Shanghai – central market for the world's No.1 consumer nation – ended the day lower in Yuan, but extended their premium above comparable London quotes to more than $2.50 per ounce as the Chinese currency held near its strongest Dollar level since mid-March.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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