Gold Shrugs Off Strong US GDP, Climbs to 6-Week Highs

Gold has posted considerable gains in the Friday session. In North American trade, spot gold is trading at $1264.43, up 0.42% on the day. On the release front, US Advance GDP posted a strong gain of 2.6%, above the forecast of 2.5%. UoM Consumer Sentiment will be released later in the day, with the key indicator expected to dip to 93.2 points.

There have been ominous warnings that the US economy is in trouble and that second quarter growth might follow a soft first quarter. However, the naysayers were nowhere to be found on Friday, as the economy expanded at an impressive clip of 2.6%. Consumer spending and business investment led the way with strong gains, as the economy recovered from a slow start to the quarter. Still, more data will be available for the next two GDP reports, which could show more restrained growth. Gold prices shrugged of the GDP numbers, as the metal has climbed to its highest level since mid-June.

It’s become an all-too-familiar pattern out of Washington – trouble for the White House has translated into losses on global stock markets, as higher political risk has made investors jittery. It was déjà vu on Thursday, as President’s struggling healthcare bill gasped its final breath as the bill was defeated in the Senate after three Republican lawmakers joined the Democrats and voted against the bill. This is another setback for President Trump, who has been unable to get Congress to pass any significant legislation, despite the Republicans controlling both the House and the Senate. Trump will now be able to focus on other issues such as tax reform, but investors are skeptical as to whether the President will have the support he needs in Congress to pass major legislation.

With the Federal Reserve holding rates at 1.25% at this week’s policy meeting, the markets focused on the rate statement, as investors looked for clues about future rate moves. The statement was cautiously optimistic in tone, with policymakers saying that the economy was growing at a moderate pace and that the labor market remained strong. The statement made note of low inflation, but said that the Fed expected the economy to continue to expand. Another key issue on the Fed’s plate is the $4.2 trillion balance sheet. The rate statement said that the Fed plans to taper asset purchases “relatively soon”, which is a likely nod at September as the start date. This would involve the Fed tapering its purchases of Treasury bonds and mortgage securities, with an initial taper likely of $10 billion/month. Although the Fed continues to talk about another rate hike in 2017, investors remain skeptical. The rate statement did not change many minds, as the odds of rate increase in December stand at 47%, according to the CME Group.

 

USD/XAU Fundamentals

  • 8:30 US Advance GDP. Estimate 2.5%. Actual 2.6%
  • 8:30 US Advance GDP Price Index. Estimate 1.3%.Actual 1.0%
  • 8:30 US Employment Cost Index. Estimate 0.6%. Actual 0.5%
  • 10:00 US Revised UoM Consumer Sentiment. Estimate 93.2
  • 10:00 US Revised UoM Inflation Expectations
  • 13:20 US FOMC Member Neel Kashkari Speaks

*All release times are EDT

*Key events are in bold

 

XAU/USD for Friday, July 28, 2017

XAU/USD July 28 at 9:20 EST

Open: 1259.20 High: 1267.46 Low: 1257.46 Close: 1264.42

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1199 1232 1260 1285 1307 1337
  • XAU/USD showed limited movement in the Asian and Europeans sessions. The pair has posted considerable gains in North American trade
  • 1260 has switched to a support role and remains fluid
  • 1285 is the next resistance line
  • Current range: 1260 to 1285

Further levels in both directions:

  • Below: 1260, 1232, 1199 and 1170
  • Above: 1285, 1307 and 1337

OANDA’s Open Positions Ratio

In the Friday session, XAU/USD ratio is showing long positions with a majority (65%), indicative of XAU/USD continuing to move higher.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.