“Gold shrugs off strong US GDP data to end higher on pre-weekend insurance buying”.
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Gold had a strong start on Thursday, rising to an early high for the day of $1993 as the conflict in Gaza intensified but then came under sustained selling pressure in Europe and early New York trading to reach a low of $1973 after a number of stronger than expected US economic reports, headlined by GDP data, raised the prospects of another Fed rate hike at the next meeting of the FOMC in November. However, the yellow metal then staged a late rally on pre-weekend insurance buying to end up o.25% at $1985 and has held narrowly between $1982 and $1987 so far this morning; we expected another volatile session with a potential trading range of $1970 to $1995 with the focus split between geo-politics and economics. Silver eased 0.31% to $22.80, platinum edged 0.33% lower to $904, while palladium gained 0.88% to end at $1141.
Market Commentary
- Gold prices flitted in a range-bound trade on Friday as traders weighed the repercussions of the Middle East conflict against expectations that U.S. interest rates would stay higher for longer after the economy’s upbeat performance last quarter. Spot gold was steady at $1,984.69 per ounce by 0131 GMT. U.S. gold futures were down 0.2% at $1,994.30.
- Israeli forces executed their biggest ground attack in Gaza in their 20-day-old war with Hamas overnight as anger grew in the Arab world over Israel’s unrelenting airstrikes on the besieged Palestinian territory.
- The U.S. economy surged at the fastest growth pace in nearly two years in the third quarter, again defying dire warnings of a recession. U.S. Treasury Secretary Janet Yellen said U.S. third-quarter economic growth of nearly 5% was a good sign that the economy was headed for a soft landing but could help keep longer-dated bond yields elevated.
- The dollar was set for a weekly gain on Friday, while U.S. Treasury yields edged 0.2% higher after easing in the last session following the release of weaker-than-expected U.S. inflation and disposable income data. Investor focus is also on the U.S. personal consumption expenditure (PCE) price index for cues on what to expect from the Fed’s policy meeting next week.
- The European Central Bank left interest rates unchanged, as expected on Thursday, snapping a 15-month streak of rate hikes, echoing the recent actions of the Federal Reserve and the Bank of England. China’s gold imports via Hong Kong fell 11% in September from the previous month, the Hong Kong Census and Statistics Department data showed on Thursday.
- Spot silver eased 0.1% to $22.80, platinum rose 0.3% to $902.72, and palladium fell 0.1% to $1,132.11.
Economic Analysis
The US economy expanded an annualized 4.9% in the third quarter of 2023, the most since the last quarter of 2021, above market forecasts of 4.3% and a 2.1% expansion in Q2, the advance estimate showed. Consumer spending rose 4%, the most since Q4 2021 (vs 0.8% in Q2 2023), led by consumption of housing and utilities, health care, financial services and insurance, food services and accommodations and nondurable goods (led by prescription drugs), recreational goods and vehicles. Exports soared 6.2%, rebounding from a 9.3% fall in Q2 and imports also increased (5.7% vs -7.6%). Private inventories added 1.32 pp to growth, the first gain in three quarters. Also, residential investment rose for the first time in nearly two years (3.9% vs -2.2%) and government spending increased faster (4.6% vs 3.3%). On the other hand, non-residential investment contracted for the first time in two years (-0.1% vs 7.4%), due to a 3.8% fall in equipment (vs 7.7%) and a slowdown in structures (1.6% 16.1%). source: U.S. Bureau of Economic Analysis
