Gold prices, which previously rose over the speculation of overestimated Advance GDP figures of the United States, plunged in the international market. The Spot Gold dropped from the level of $1288.77 (Day’s high on 26th April 2019) to the level of $1278.17 (Day’s low on 29th April). However, the prices recovered slightly today (as on 30th April).
Gold prices plunged after the United States quarterly Advance GDP stood at 3.2% for the March quarter against the market expectation of 2.2%. The improvement in the GDP figures raised concern among the bullion investors over the growth in the economic conditions; which in turn, exerted pressure on gold prices.
Apart from gold, the dollar prices also dropped as the reduced inflation expectation for the quarter jolted the currency speculators over unlikely potential interest rate increase.
Dollar Index dropped from the level of 98.33 (Day’s high on 26th April) to the present level of 97.80. The inflation expectation or the Advance GDP Price Index stood at 0.9% for the March quarter, as compared to the market expectation of 1.3%. A decline in annualized inflation in the United States reduced the chances of an interest rate hike by the U.S. Federal Reserve; which in turn, exerted pressure on dollar prices.
Gold and Dollar both plunged initially, however, a drop in the price index, coupled with an array of other weak economic figures, supported the gold prices. The Spot Gold recovered from its recent low of $1278.17 to the present level of $1282-$1283.
Other weak data that provided cushion to gold prices include: Pricing Index, Personal Income in the United States, and Manufacturing PMI, Non-Manufacturing PMI in China.
As per the data, the Core PCE Price Index stood at 0.1% for March against the market expectation of 0.2%. A drop in price index reduced the inflation expectation, which in turn, supported the gold prices.
The Personal Income in the United States declined and stood at 0.1% for March against a forecast of 0.4%. However, the personal spending in the United States rose and stood at 0.9% against the market expectation of 0.7% for March 2019.
A rise in US personal spending was in line with the high GDP figures, which as per the market participants, could exert pressure on gold prices ahead.
Apart from the United States, another significant economy, i.e. China, experienced a drop in manufacturing activities, which further provided a cushion to the gold prices.
As per the data, the Manufacturing PMI stood at 50.1 for April 2019, against the market expectation of 50.7. The Caixin Manufacturing PMI also declined and stood at 50.2 for April, as compared to the forecast of 51.0. The drop in both the figures supported the gold prices; however, the figures remained above their mean of 50, which prevented any sharp gain in the gold prices.
To gauge the direction of gold prices ahead, the market participants will be eyeing on the United States consumer confidence, which will express the spirit of the people in the domestic economy.
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