Gold prices experienced fluctuations and a decline this week, primarily due to the release of strong US economic data and scheduled interest rate hikes by the Federal Reserve and the European Central Bank. These factors had a limited impact on gold prices.
Looking ahead to next week, the gold market will face further challenges with the release of significant data, including the initial value of the euro zone’s second quarter GDP, the US ADP employment report, the US ISM manufacturing PMI, and the highly anticipated US non-farm payrolls report for July. Additionally, the Bank of England will announce a resolution.
The strong US economic data released this week heavily influenced the decline in gold prices. On Thursday, the US Department of Commerce reported that real GDP in the second quarter grew by 2.4% year-on-year, surpassing market expectations. Personal consumption expenditure also increased by 1.6% year-on-year, exceeding market expectations. Inflation data slowed down significantly, with the PCE price index and the PCE core price index both showing slowdowns from previous values.
The Commerce Department attributed the economic growth in the second quarter to increases in consumer spending, business capital spending, and private sector inventories. The drop in US exports was one of the factors that weighed on growth. Other data released this week, such as initial jobless claims and durable goods orders, also demonstrated the resilience of the US economy.
Federal Reserve Chairman Jerome Powell expressed an optimistic outlook for the US economy, stating that the Fed no longer expects a recession. Powell emphasized the importance of achieving the 2% inflation target without creating massive unemployment, and highlighted the need for continued efforts to reduce inflation.
Goldman Sachs also lowered the probability of a US recession based on strong economic data, stating that the US economy can maintain resilience while fighting inflation. However, other analysts cautioned against over-interpreting the GDP data, emphasizing the need to observe the impact of the Fed’s interest rate hikes and the potential for a US economic recession.
The policy decisions of the three major central banks this week, including the Federal Reserve, the European Central Bank, and the Bank of Japan, had limited impact on gold prices. While the Fed and the ECB raised interest rates, the future of rate hikes remains uncertain. The ECB hinted at a possible pause in rate hikes, while the Fed provided few clues about the September meeting.
Analysts believe that the European Central Bank may end its tightening cycle earlier than the Fed, considering inflationary pressures and softening economic activity. However, even the most hawkish ECB members are starting to prepare for an end to tightening. The Bank of Japan kept ultra-low interest rates on hold but made adjustments to its yield curve control policy.
In conclusion, gold prices fluctuated and fell this week, influenced by strong US economic data and scheduled interest rate hikes. The upcoming release of significant data and central bank decisions will continue to impact the gold market. Investors and analysts will closely monitor these developments to assess the future direction of gold prices.