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Tuesday, September 28, 2021

Gold Gained Friday as US Inflation Offset GDP Data


Gold prices rose Friday, after slipping to more than 1-week lows in the prior session, as soft US inflation numbers offset better-than-expected Q-2 economic growth that kept bets alive for an interest rate cut next week.

Spot gold was last seen up 0.4% at $1,419.10 oz Friday, but still on track for the 1st weekly drop in 3 weeks.

U.S. gold futures settled up 0.3% at $1,419.30 per ounce.

The report from the US Commerce Department showed that the economy slowed less than expected in Q-2 as GDP increased at a 2.1% annualized rate.

The report also showed a pickup in inflation last Quarter, though the trend remained benign. A gauge of inflation tracked by the Fed increased at a 1.8% rate last Quarter, just below its 2% target.

The GDP number suggest that Fed may not be as aggressive as they once were but the reason we haven’t collapsed is the inflation number was a little bit worrying,” sector analyst Edward Meir said.

Federal funds futures implied traders saw about 84.5% chance for a Quarter-point rate cut at the FOMC’s 30-31 July policy meeting, higher than the probability seen shortly before the release of the GDP data.

Lower interest rates reduce the opportunity cost of holding non-yielding gold.

Capping gold’s momentum was a stronger USD, which held near 2-month highs against a basket of 6 peer currencies.

“The market will now focus its attention on next week’s Fed meeting … if Fed Chair Powell indicates that a rate cut cycle is imminent, the dollar is likely to depreciate, which should in turn benefit gold,” Commerzbank said in a note.

Uncertainties over whether Washington and Beijing will be able to settle their trade differences has many investors on their guard. Negotiators from the 2 sides will meet in Shanghai next week.

Silver was down 0.3% at $16.35 oz, while Platinum slipped 0.2% to $863.38.

Have a terrific weekend.

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