Gold Gained Friday as US Inflation Offset GDP Data

Gold Gained Friday as US Inflation Offset GDP Data

$GLD, $XAU

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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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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