Daily digest market movers: Gold price aims for firm footing ahead of US data
- Gold price edges higher above $2,320 as the US Dollar extends its correction. The US Dollar faces selling pressure as weak preliminary PMI numbers for April raised concerns over the US economic outlook. The survey signalled that new business inflows in April fell for the first time in six months.
- Investors will turn their attention to the US Q1 GDP data, a key indicator of the country’s economic performance. The consensus points to a moderate 2.5% expansion, cooling from the 3.4% growth in 2023’s last quarter. Though the world’s largest economy is expected to experience a slower growth rate, growth is expected to be the strongest among the Group of Seven (G7) economies.
- Although it refers to the period from January to March, an upbeat GDP growth rate would set a positive undertone for the US economic outlook and would allow Federal Reserve policymakers to keep the monetary policy stance restrictive for a longer period. This situation would help the US Dollar, and likely weigh on Gold. On the contrary US Dollar is not expected to be hit much by slower-than-expected GDP growth as it is unlikely to scrap the speculation for the Fed to achieve the so-called soft landing, in which the central bank achieves price stability without triggering a recession.
- The week is full of volatile events as the core PCE inflation data will follow the Q1 GDP data – the Fed’s preferred inflation measure – for March, which will be published on Friday. Core PCE inflation is expected to have grown steadily by 0.3% on month, with annual figures softening to 2.6% from the 2.8% recorded in February.
- The underlying inflation data will significantly influence the Fed’s interest rate outlook ahead of its next meeting on May 1. In the May policy meeting, the Fed is widely anticipated to keep interest rates unchanged in the range of 5.25%-5.50%.
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