- The Commerce Department reported a 2.4% increase in US gross domestic product.
- Fewer people sought to claim unemployment benefits in the US.
- Analysts and traders slightly reduced their gold forecasts for this year.
A stronger dollar and rising bond yields caused gold prices to drop over 1% to a two-week low. Spot gold declined by 1.4% to $1,943.89 per ounce, while US gold futures fell 1.36% to $1,943.40 per ounce.
The US dollar gained ground on Thursday, driven by news of stronger-than-expected economic growth in the country, despite the Fed’s consecutive interest rate hikes.
US GDP (Source: Bureau of Economic Analysis)
On Thursday, the Commerce Department reported a 2.4% increase in US gross domestic product (GDP) for the second quarter, surpassing economists’ estimates. This positive data alleviated recession concerns due to the Federal Reserve’s aggressive rate-tightening cycle.
The Labor Department‘s report also showed that fewer people sought to claim unemployment benefits, further reinforcing the positive outlook.
On Wednesday, the Federal Reserve implemented its 11th consecutive rate hike, raising the benchmark policy rate by 25 basis points to a range of 5.25% to 5.50%. The European Central Bank followed suit on Thursday, increasing its main reference rate by 25 basis points. This marked the ninth consecutive increase and brought the rate to 3.75%. The move was aimed at controlling high consumer prices.
On Thursday, a Reuters poll revealed that analysts and traders slightly reduced their gold forecasts for this year. The main reason behind this adjustment was the belief that gold, which currently yields zero interest, would require a catalyst to propel it to reach all-time highs. Such a catalyst could be an interest rate cut from the Federal Reserve.
The poll, which involved 36 analysts and traders and was conducted in July, produced the following median forecasts: $1,950 per ounce for gold in the third quarter of this year, $1,995 in the fourth quarter, $1,944.5 for the entire year, and $1,988 in 2024. A Reuters poll three months earlier predicted prices would average $1,950 in 2023.
Recently, gold’s value has declined by nearly 5% since its surge in early May, coming close to its all-time high from 2020. This retreat occurred as fears of a global banking crisis diminished, and the issue of the US debt ceiling was resolved. Gold is often considered a hedge against political and financial uncertainty.