Gold futures are trading lower on Friday, hitting a two-week low as stronger-than-expected U.S. economic data drove up Treasury yields, helping to make the U.S. Dollar a more attractive investment. A stronger dollar tends to make dollar-denominated gold a less-desirable asset. Optimistic gold traders are saying the market is being underpinned by safe-haven buying tied to concerns over a global economic slowdown.
At 08:18 GMT, April Comex gold futures are trading $1309.40, down $6.70 or -0.51%.
The price action continues to be driven by Thursday’s U.S. Commerce Department report showing a better-than-expected performance in fourth quarter gross domestic product (GDP). Advance GDP rose 2.9%, betting the 2.2% forecast, but coming in below the 3.4% previous read. The number put GDP up 2.9 percent for the year, just below the 3 percent annual growth target in 2018.
On Thursday, the benchmark 10-year Treasury note yield rose by 3.1 basis points after the release of the GDP data. This helped support the U.S. Dollar, which had hit a more than three-week low earlier in the session. Gold is a non-yielding asset so when Treasury yields rise, investors tend to dump gold in favor of the U.S. Dollar.
This week’s price action indicates gold received no support from Fed Chairman Powell’s testimony or the weaker-than-expected economic data from China and Japan. The strong-than-expected U.S. data also worked to pressure gold prices.
The selling pressure could escalate on Friday if Treasurys continue to rise along with appetite for risk. Today’s slew of economic data could influence the price action.
These reports include the Fed’s preferred inflation indicator the Core PCE Price Index. It is expected to show a monthly increase of 0.2%.
Personal Income is expected to have risen 0.5% in December and 0.2% in January, while Personal Spending is expected to have fallen -0.2%.
Final Manufacturing PMI is expected to come in unchanged at 53.7. The major report today is ISM Manufacturing PMI. It is forecast to have fallen to 55.6 from 56.6.
Revised University of Michigan Consumer Sentiment is expected to rise to 95.8 from 95.5.
The most important report is the ISM Manufacturing PMI. A much weaker than expected number could offset yesterday’s optimistic GDP report. This could be supportive for gold prices.