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Gold Prices React to US Economic Data and Fed Outlook

Gold prices are hovering close to the multi-week maximums reached on Wednesday as the financial markets continue to ponder the impact of the latest economic data released in the US. Disappointing employment and GDP numbers mean a lower likelihood of further rate hikes by the Federal Reserve, resulting in softer treasury yields and losses for the dollar in relation to other major currencies. This scenario offers support to gold prices due to the precious metal's inverted correlation with the greenback. However, the upside for bullion is capped in the short term, as investors will now be waiting for the release of the Non-Farm Payrolls data on Friday. Should the US labour market give more signs of weakness, there may be scope for further gold gains. However, even in the medium-to long-term, these gains will be limited because even if the Fed doesn't hike again, rates will remain elevated for a prolonged period.

Ricardo Evangelista – Senior Analyst, ActivTrades