Gold Prices Near 6-Week Dollar Low, 15-Week GBP High on US vs UK GDP and Inflation

GOLD PRICES fell back Friday after new US data showed strong GDP growth but slower inflation, putting the metal on track for its lowest weekly finish in six against the Dollar below $1318 per ounce.
Adjusted for inflation, the world’s largest economy expanded at an annualized pace of 2.3% in the first 3 months of 2018, the Bureau of Economic Analysis said.
Slowing from end-2017’s reading of 2.9%, that real pace of growth in US gross domestic product beat analyst forecasts at 2.0% thanks to a drop in the rate of inflation, which slowed from 2.3% to 2.0% per year.
With gold prices down 1.4% from last Friday, silver also held near this week’s lows, losing 3.5% from last weekend to trade at $16.52 per ounce.
World stock markets followed Wall Street’s gains overnight, with the Stoxx Europe 600 index reaching near 3-month highs.
Crude oil slipped to trade $1 below Tuesday’s new 3-year highs above $75 per barrel of Brent.
Longer-term interest rates also edged back, holding the yield offered by 10-year US Treasury debt 5 basis points below Tuesday’s peak at 3.04% – a high matching end-2013’s then two-year high.
Chart of gold's weekly finish in US Dollars vs. 10-year US Treasury bond yields. Source: St.Louis Fed
“Rising yields tend to weigh on gold prices as they increase the opportunity cost of holding gold,” said this week’s note from specialist analysts Metals Focus.
“It is therefore likely that gold could remain capped in the short-term. However, if inflationary expectations become more entrenched [thanks to rising oil prices], gold could benefit as it starts to act as an inflation hedge.”
In contrast to Dollar-priced bullion on Friday, the UK gold price in British Pounds per ounce jumped to touch £960 – near its highest weekly close since mid-January – as Sterling sank on the currency market following the weakest GDP data since 2012.
Real UK economic output grew just 0.1% between New Year and end-March compared with the previous 3 months, the Office for National Statistics said Friday morning, well below analyst forecasts.
“The Bank of England is [now] more likely than not to sit tight at [its] May meeting,” reckons Howard Archer, chief advisor at economic forecasting group EY Item Club.
That would leave UK interest rates at 0.5% – fully two percentage points below the most recent annual pace of inflation.
“However, we suspect this delay will prove short-lived,” Archer adds, “as the economy shows improvement and the MPC looks to gradually normalize monetary policy.”
After the European Central Bank yesterday held its QE money creation and negative-interest policies unchanged yet again, gold priced in Euros meantime neared its highest Friday finish since late January at €1092 per ounce.


This publication is for education purposes only and should not be considered either general of personal advice. It does not consider any particular person’s investment objectives, financial situation or needs. Accordingly, no recommendation (expressed or implied) or other information contained in this report should be acted upon without the appropriateness of that information having regard to those factors. You should assess whether or not the information contained herein is appropriate to your individual financial circumstances and goals before making an investment decision, or seek the help the of a licensed financial adviser. Performance is historical, performance may vary, past performance is not necessarily indicative of future performance. This report was produced in conjunction with ABC Bullion NSW.

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