Gold Prices Extend Losses As GDP Revision Flags Price Pressure

27/06/2019 13:46:16 Economic Indicators

Gold prices extended losses in early morning trade on Thursday after a revision to first-quarter gross domestic product data showed more inflationary pressure than previously thought.

Spot gold lost $6.96, or 0.5%, to $1,402.15 by 9:41 AM ET (13:41 GMT), while gold futures for August delivery on the Comex division of the New York Mercantile Exchange, fell $10.25, or 0.7%, to $1,405.15 a troy ounce.

Since Federal Reserve Chairman Jerome Powell sidestepped political pressure to pursue aggressive policy easing and insisted on the need to wait for further economic signals to see if rate cuts were appropriate, market focus on data has sharpened to consider, even more closely, hawkish or dovish aberrations.

Although the third estimate of first-quarter growth was unchanged at 3.1%, gold prices extended losses as the dollar firmed after the personal consumption expenditure (PCE) prices, a preferred indicator of inflation for the Fed, was revised higher in both its headline and core readings.

The downward move in gold occurred despite a generally weak reading from the data set as a whole. Marc Chandler, chief market strategist at Bannockburn Global Forex, indicated in a tweet after the release that he felt second-quarter growth could possibly drop below 2%.

In a separate report, weekly jobless claims also gave a weaker than expected sign.

Prior to the data releases, gold prices were already dropping as markets seemed to interpret a more optimistic outlook over the possibility that China and the U.S. could reach a trade truce, reducing safe-haven demand.

The South China Morning Post reported Thursday that Washington and Beijing have “tentatively agreed” on a truce that would put a hold on U.S. President Donald Trump’s pending round of additional tariffs on Chinese goods.

The Wall Street Journal later reported that Chinese President Xi Jinping was planning to present Trump with proposed terms of a settlement designed to put an end to their trade conflict when they meet after the G20 summit at 11:30 AM (2:30 GMT) local time in Osaka on Saturday. That's 10:30 PM ET on Friday.

The WSJ noted however that Beijing was including a list of conditions and it was not clear they would be acceptable to the American president.

In other metals trading, silver futures lost 0.9% to $15.238 a troy ounce by 9:43 AM ET (13:43 GMT).

Palladium futures slipped 0.1% to $1,524.05 an ounce, while sister metal platinum lost 0.4% to $818.45.

In base metals, copper traded down 0.3% to $2.708 a pound.