Advertisement
Advertisement

Gold Shaken After Upbeat US GDP, Here Comes the Profit Taking

By:
Mauricio Carrillo
Updated: Jul 26, 2019, 13:55 UTC

XAU/USD is now testing the 1,425 area, where a confluence of 200 and 50 days moving averages are. Now, profit-taking is expected due to normal Friday conditions.

Gold Shaken After Upbeat US GDP, Here Comes the Profit Taking

Gold reacted down to the better-than-expected US GDP in the second quarter. However, it recovered ground and is posting daily gains. Dollar is visiting highs since May 31 as Fed’s cut hopes fade.

Other metals such as silver, copper, and platinum reacted down but also recovered losses. Weekly gains are in danger for most metals as the GDP has made the U.S. dollar a more attractive investment.

U.S. GDP above expectations, but the slower growth pace in a year

Real US GDP Q2 2019
Real US GDP Q2 2019 historical data

The economy in the U.S. advanced 2.1% in the second quarter of 2019, above the 1.8% expected by the market but a slowdown from the 3.1% annualized GDP performed in the first quarter of 2019.

Q2 2019 Gross Domestic Product is the weakest since the 1.1% reached in the Q4 2018.

GDP Price Index rose 2.5% in the Q2, well above 1.9% expected by market and an acceleration from the positively revised 0.8% in the previous period.

Personal Consumption Expenditures advanced 1.8%, below the 2.0% expected; while PCE prices posted a 2.3% increase, above 0.6% previously anticipated.

Long story short, U.S. GDP slowed to 2.1% in the second quarter, but it posted a better reading than expected due to an active consume in the last three months.

The data is hurting Fed’s cut speculations as the combined first-half GDP rose 2.6%, well above expectations. The numbers are significant as the United States is in the middle of a trade war with China.

Also, Brexit and global slowdown are over the table.

There are no signs that the U.S. economy is slowing its pace, and critical components are healthy too. Employment sector, wages, corporate profits, and equities are strong.

Do you still think about a 50bp cut in next week FOMC? Forget about it. The 25bp cut is still on the table, but the case for a rate cut is not clear given recent economic data. However, the options are open.

Dollar index up to near 2-month highs

GDP pushed the dollar index up on the day as investors are digesting the data and considering rate cut options. DXY jumped to its highest level since May 31 at 98.00.

Let’s see how far the greenback can go after the dust settles down. Currently, it is posting 0.16% daily gains at 97.95. On the week, DXY is advancing 0.90%.

Gold in a rollercoaster after U.S. GDP

XAUUSD daily chart July 26
XAUUSD daily chart July 26

Gold reacted down following the upbeat U.S GDP in the second quarter as the unit fell to test the 1,414 area right after the data. However, the support was strong and sent the XAU/USD back to previous levels around 1,420.

XAU/USD is now testing the 1,425 area, where a confluence of 200 and 50 days moving averages are. Now, profit-taking is expected due to normal Friday conditions.

Currently, gold is trading 0.45% positive on the day at 1,420. The unit is holding levels above the mentioned 1,414 with the 1,430 as the immediate resistance. Above there, 1,440 and 1,455 are the levels to watch.

Silver positive after the 16.30 holds the unit

XAGUSD daily chart July 26
XAGUSD daily chart July 26

Silver reacted negatively after the GDP, but it quickly recovered losses as the 16.30 level acted as strong support. It is now trading 0.55% daily gains at 16.50.

XAG/USD is ready to close its third positive week in a row with a 1.85% weekly gain in the making.

Technical conditions remain positive for the XAG/USD with the 16.60 and 16.65 as the next resistance area. Be aware of Friday’s rebalancing movements.

About the Author

Mauricio is a financial journalist with over ten years of experience in stocks, forex, commodities, and cryptocurrencies. He has a B.A and M.A in Journalism and studies in Economics by the Autonomous University of Barcelona. While traveling around the world, Mauricio has developed several technology projects focused on finances and communications. He is the inventor of the FXStreet Currency Poll Sentiment index tool.

Did you find this article useful?

Advertisement