US GDP data beats expectations, gold falls to lowest level in over two weeks
The US released GDP data that exceeded expectations, causing the price of gold to drop by nearly 3%, falling to the lowest level in over two weeks. US government data shows that GDP grew at an annual rate of 2.8% in the second quarter, higher than the forecasted 2.1% and the first quarter's 1.4%. Economists believe this may increase the possibility of the Federal Reserve maintaining higher interest rates. The main reason for the decline in the price of gold is primarily due to the drag effect caused by higher interest rates. Market analysts believe that the downside potential for gold may be limited and expect the bullish trend to recover quickly
On Thursday, the GDP data released by the United States exceeded expectations, raising the possibility of interest rates remaining high in the long term, leading to a nearly 3% drop in the price of gold to its lowest level in over two weeks.
According to the Zhitong Finance and Economics APP, Jake Hanley, Managing Director and Senior Investment Portfolio Specialist at Teucrium Trading, stated, "The GDP surpassing expectations may strengthen the view that the Federal Reserve needs to maintain high interest rates." He added that high interest rates have a "dragging" effect on the price of gold.
The data released by the U.S. government on Thursday showed that the GDP grew at an annual rate of 2.8% in the second quarter, higher than the average level. Economists had predicted a growth of 2.1%, while the growth rate in the first quarter was 1.4%.
Against this backdrop, the price of gold for August delivery on Comex fell by $62.20, or 2.6%, to close at $2353.50 per ounce, with the lowest trading price at $2351.90. This is the lowest intraday level since July 3. Gold had risen for two consecutive days prior to this and hit a new intraday historical high of $2488.40 on July 17.
Fawad Razaqzada, market analyst at City Index and Forex.com, believes that the recent main influencing factor on metal prices is the "sudden drop in various risk assets." He pointed out that "in recent years, the price of gold has been consistent with the trend of stock indices."
On Wednesday, the U.S. stock market experienced its most severe decline since 2022.
Razaqzada believes that the downside potential for gold may be limited and expects the bullish trend to resume soon. He noted that the U.S. economic data on Thursday showed a "mixed performance," indicating that inflation pressures and economic activity are "weakening, paving the way for the Federal Reserve to cut interest rates twice this year."
The U.S. Department of Commerce reported on Thursday that durable goods orders in June fell by 6.6%, marking the largest decline since the pandemic.
During Thursday's trading, U.S. Treasury yields declined. Hanley stated, "It appears that the overall market sentiment is to sell risk assets."
He pointed out that the gold sell-off on Thursday led him to believe that traders may be "attempting to take profits." He said, "The stock market has performed poorly in recent days, and gold falling below $2400 has become an excuse for traders to adjust their positions."
Hanley believes that prices may continue to face pressure in the short term, with $2300 being a support level to watch. He added that it took four years for the price of gold to break through the $2000 mark, and the target for the bulls is $2500. "I do believe that gold will reach this level. As for the timing, in the gold market, patience has been proven to be wise."