Gold Trading Alert: United States Q2 GDP was stronger than expected, and gold prices briefly fell below the 55-day moving average

In early Asian trading on Friday (July 26), spot gold hovered at a low level and is currently trading near $2364.42 per ounce. Gold prices fell more than $30 on Thursday, briefly falling below the 55-day moving average at 2360.70 during the session, hitting a low of $2353 / ounce and closing at $2364.39 / oz, on the one hand, some bulls took profits after the recent rally, on the other hand, because United States' GDP growth in the second quarter rebounded and was stronger than market expectations, reflecting that the United States economy is much stronger than people realize, which provided support for the dollar and Treasury yields, putting significant pressure on gold prices.

Gold prices have fallen more than 1.6% (nearly $40) this week, and investors will focus on the June PCE data of United States released in the evening, if the data strengthens the expectation of slowing inflation growth, it is expected to provide gold prices with a short-term rebound opportunity; However, if the data is in line with expectations or unexpectedly strong, gold prices will face further downside risks.

Marex analyst Edward Meir said: "There was definitely some profit-taking, which was triggered by the weakness in United States equities, and this was not just a sell-off. "

Gold hit an all-time high of $2,483.60 last week amid growing optimism about the Federal Reserve's interest rate cut in September.

According to the CME FedWatch tool, the market is pricing in a 100% chance of a rate cut in September. In a low interest rate environment, the attractiveness of non-yielding gold tends to be magnified.

U.S. Treasury yields narrowed their losses at the start of the United States Commerce Department's gross domestic product (GDP) data. The data showed that United States' GDP grew at an annual rate of 2.8% in the second quarter from the previous quarter, higher than economists' forecast of 2.0% and stronger than the 1.4% in the first quarter. In addition, the data also showed that inflationary pressures have eased, providing room for the Fed to cut interest rates this year as widely expected.

"The market is ahead of the curve on the Fed rate cut," said Marc Chandler, chief market strategist at Bannockburn Forex in New York. "

He also cited comments made by former New York Fed President Dudley in a Bloomberg column on Wednesday that the Fed should cut interest rates next week, citing recent employment data.

"The GDP data shows that the Fed doesn't have that sense of urgency," Chandler said. "

Jay Hatfield, CEO of Infrastructure Capital Advisors, said: "The bond market is showing quite resilience because today's GDP data is good. We're preparing for the blonde economy, and we're worried that the housing sector is really going to pivot, which could lead to GDP coming down to at least zero, but that doesn't seem to be going to happen and the Fed will eventually cut rates, albeit a little later, but still so. "

Traders are now awaiting Friday's release of United States personal consumption expenditures (PCE) data, the Fed's preferred inflation gauge. The market expects PCE to increase by 2.4% year-on-year and 0.1% month-on-month in June, and core PCE may increase by 2.5% year-on-year and 0.1% month-on-month

PCE, the Fed's preferred inflation measure, was flat in May and 2.6% year-on-year. Excluding volatile food and energy, core PCE rose 0.1% sequentially and 2.6% y-o-y

Bob Schwartz, senior economist at Oxford Economics, said that if the upcoming PCE is better than expected, the Fed will formally put the discussion of a policy pivot on the agenda. However, he believes that this will not change the path of the Fed's data dependence, and further future rate cuts will still depend on the performance of economic data. "The data is likely to be bumpy next, and a policy test for the Fed is coming."

Stephen Stanley, chief economist at Santander Capital Markets, worries that the recent inflation report may have exaggerated the pace of the slowdown. There has been an unusual drop in the prices of some goods and services. He doesn't think this will last long, and the Fed may experience another unwelcome data surprise that will delay the window for the first rate cut until November or beyond.

In addition, investors need to continue to pay attention to the United States election, geopolitical situation and other related news.

United States economic growth in the second quarter exceeded expectations, and price pressures eased

United States economy grew faster than expected in the second quarter, as consumer spending and business investment grew steadily, but inflationary pressures weakened, leaving expectations of a rate cut by the Federal Reserve in September unchanged.

The United States Commerce Department's preliminary second-quarter gross domestic product (GDP) data released Thursday showed that higher inventories and government spending boosted economic growth in the second quarter. However, the recovery in the housing market has regressed, causing a slight drag on the economy. The trade deficit has widened further, weighing on GDP growth.

The report dispelled fears that the economic expansion could come to an abrupt halt, which had been exacerbated by the lackluster performance in the first quarter and April.

Despite the Fed's aggressive interest rate hikes in 2022 and 2023, the United States economy has outperformed other countries thanks to the resilience of the labor market.

"Economic growth is solid, not too hot and not too cold," said Christopher Rupkey, chief economist at FWDBONDS. "

The United States Bureau of Economic Analysis said in its preliminary Q2 GDP report that GDP grew at an annualized rate of 2.8% quarter-on-quarter, double the 1.4% growth rate in the first quarter. Economists surveyed had previously forecast GDP growth of 2.0%, with forecasts ranging from 1.1% to 3.4%.

United States grew at an average rate of 2.1% in the first half of this year, half the 4.2% growth rate in the last six months of 2023. That's slightly higher than the 1.8% growth rate that Fed officials believe doesn't stimulate inflation.

Consumer spending, which accounts for more than two-thirds of the economy, grew at a rate of about 2.3% in the second quarter, after slowing to 1.5 percent in the first quarter. The increase in consumption was aided by increased spending on services, including health care, housing and utilities, as well as spending on club memberships, visits to sports centers, parks, theaters and museums, and gambling.

Consumers have also increased their spending on goods, including the purchase of new light trucks, recreational goods and vehicles, furniture, durable household appliances, and energy products.

Wage growth has supported consumption to some extent. A separate report released by the Labor Department on Thursday showed a steady slowdown in the labor market, with initial claims for state unemployment benefits falling by 10,000 to a seasonally adjusted 235,000 in the week ended July 20.

Business investment picked up, and spending on equipment, mainly aircraft, surged at an 11.6% rate, up just 1.6% in the first quarter. Spending on IP products continued to rise, albeit at a slower pace compared to the rapid growth in the first quarter.

Businesses also amassed more inventory, which increased by $71.3 billion, compared to just $28.6 billion in the first quarter.

Inventories contributed 0.82 percentage points to Q2 GDP growth after dragging down GDP growth for two consecutive quarters. This offset the 0.72 percentage point drag from the widening trade deficit.

Even excluding inventories, trade and government spending, United States growth was solid in the second quarter, with domestic demand growing at a rate of 2.6%. Final sales to domestic consumers increased in line with the first quarter.

Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said: "The United States economy is much stronger than people realize, and given the market's fears of slowing growth, they should breathe a sigh of relief. "

Faster GDP growth heralds higher labor productivity, which will slow labor cost growth and ultimately ease price pressures. The core personal consumption expenditures (PCE) price index, which excludes volatile food and energy, rose at an annualized rate of 2.9% in the second quarter and surged 3.7% in the first quarter.

While the core PCE price index rose slightly more than economists expected of 2.7%, the trend is that it is slowing. Core inflation rose 2.7% year-on-year, which policymakers are happy to hear ahead of the start of their two-day policy meeting next week.

The core PCE price index is one of the inflation measures that the Fed tracks to achieve its 2% target.

The gross domestic purchase price index, the government's broadest measure of prices in the economy, rose 2.3 percent in the second quarter and 3.1 percent in the first quarter.

Over the past year, the Fed has maintained the target range for its benchmark overnight interest rate at the current 5.25%-5.50%. Since 2022, the Fed has raised its policy rate by 525 basis points. Financial markets are pricing in three rate cuts this year, starting in September.

Despite the steady pace of economic growth, the outlook for the second half of the year is uncertain. The labor market is slowing down, which will affect wage growth.

While wages have risen, household disposable income grew more slowly in the second quarter, after adjusting for inflation and taxes, rising by just 1.0% in the previous quarter after rising 1.3% in the first quarter.

This means that consumers used their savings in the second quarter, while also reducing their savings for spending. The savings rate fell to 3.5% from 3.8% in the first quarter and is now well below the pre-pandemic average.

Economists also estimate that much of the impact of the Fed's rate hikes remains unfelt. State and local government revenues are also slowing, which could weaken spending. In addition, there are concerns about new tariffs, and if former President Donald Trump returns to the White House in November's presidential election, companies may adopt a "front-loading" approach to imports.

Nonetheless, a recession is not expected as monetary policy is expected to ease this year.

Scott Anderson, chief United States economist at BMO Capital Markets, said: "In the second half of the year, economic activity will indeed slow and enter a trajectory below potential growth. "

The market expects the Fed to start cutting interest rates in July and starting in September, with data showing that the United States economy has regained momentum

After the latest data showed that the United States economy regained momentum in the last quarter, the market expects Fed policymakers to keep the target range of the short-term benchmark interest rate unchanged at 5.25%-5.50% next week, and then wait until September to start a series of rate cuts.

Traders see the probability of a rate cut by the Fed meeting next week to less than 7% from about 9% before the report. The government report showed that the United States economy grew by 2.8% in the second quarter, faster than expected and twice the growth rate in the first quarter.

Ryan Sweet of Oxford Economics wrote that the acceleration "should help ease concerns about the durability of the economic expansion and quell the narrative that the Fed needs to cut rates in July".

Traders in futures contracts tied to the Fed's policy rate continue to see rate cuts of 25 basis points in September, November and December, but have reduced bets that the Fed's first rate cut will be even larger.

Ahead of the data, traders were pricing in about a 21% chance that the Fed would cut rates by more than 25 basis points at its September meeting; That probability is now down to about 15 percent.

Harris pressures Netanyahu on humanitarian situation in Gaza, says 'I won't be silent'

United States Vice President Kamala Harris held "candid" talks with Israel Prime Minister Benjamin Netanyahu on Thursday and put stern pressure on him about the humanitarian situation in Gaza. If Harris is elected president United States, how the policy towards Israel will change, all walks of life are closely watching the signals sent by this meeting.

"Israel has the right to defend itself. But how you defend yourself is important," Harris told reporters after the meeting. She said that she was gravely concerned about the extent of the suffering of the people of Gaza. "I have made it clear that I am gravely concerned about the dire humanitarian situation there." She said. "I'm not going to be silent."

Harris's tone of speech was sharp and serious, reflecting a possible shift in the way United States President Joe Biden deals with Netanyahu.

Hours ago, Biden urged a ceasefire during face-to-face talks with Netanyahu. White House national security spokesman John Kirby said there were still differences between Israel and Hamas militants over pushing for a ceasefire, but the gap was narrower than before.

"Both sides have to make compromises," Kirby said. ”

United States State Department spokesman Miller said, "I think the message from the U.S. side in this meeting will be that we need to reach this agreement." ”

The visit comes amid a change in United States politics, with Biden withdrawing from his re-election bid on Sunday to support Harris as the Democratic nominee for the presidential election.

On Friday, Netanyahu will travel to Florida to meet with Trump.

Harris has been consistent with Biden on Israel, but in a tougher tone.

The Kremlin said Russia is willing to negotiate with Ukraine to end the war, but it needs to find out how willing Kyiv is

The Kremlin said on Thursday that Russia is willing to negotiate with Ukraine on ending the war, which Moscow calls a special military operation, but needs to figure out how willing Kyiv is to engage in such talks.

Kremlin spokesman Dmitry Peskov told reporters that Moscow is ready for negotiations, which could take many forms.

Harris quickly launched a campaign offensive to close the poll gap with Trump

United States Vice President Kamala Harris launched a campaign offensive on Thursday against the largest teachers' union in the United States, pledging to "fight for the future"; At the same time, the latest poll results show that the gap between her and her Republican opponent Trump is narrowing.

Harris quickly took over from 81-year-old President Joe Biden as the Democratic presidential nominee, breaking the stagnant campaign. Multiple polls show that former President Donald Trump's lead is shrinking.

Harris, 59, spoke to the United States Teachers Federation in Houston, focusing on economic policy and workers' rights, promoting affordable health care and child care programs, while slamming Republicans for obstructing gun control in the wake of school shootings.

"We're fighting for the future," Harris told an audience of about 3,500. "We are fighting for the most basic freedoms. I want to say to all the leaders here: Come on. ”

Since Biden withdrew from the election on Sunday, a series of polls, including Reuters/Ipsos, have shown that Harris and Trump are evenly matched in a head-to-head head-to-head, setting the stage for a fierce election campaign over the next three-and-a-half months.

A national poll released Thursday by The New York Times/Siena College showed that Harris had narrowed Trump's lead. Among registered voters, Mr. Trump was slightly ahead of Mr. Harris's 46 percent with 48 percent, compared with 49 percent to 41 percent in early July, when Mr. Biden performed poorly in the just-concluded debate, sparking calls within the Democratic Party for him to relinquish his candidacy.

While national polls provide an important signal of United States support for political candidates, only a handful of highly competitive states are often able to influence the outcome of the United States Electoral College to ultimately determine who wins the presidential election.

Harris also got good news on that front, with a poll released by Emerson College/The Hill showing that she has begun to close the gap with Trump in five key battleground states: Arizona, Georgia, Michigan, Pennsylvania and Wisconsin. According to polls of registered voters in these states, Trump still narrowly leads Harris in all states except Wisconsin, which is tied with Trump.

Overall, polls show that while the 78-year-old still retains a slim advantage, his approval ratings have not risen significantly after last week's Republican National Convention, which the Republican candidate had hoped would have boosted through the highly scripted, televised and costly convention.

Trump sharply criticized Harris at her first rally since replacing Biden as presidential candidate Wednesday night. On Thursday, he continued to criticize her online.

At 07:53 Beijing time, spot gold is now at $2364.22 per ounce.