Gold Rebounds as Fed Rate-Cut Prospects Dampened by US GDP Data

Compared to the converted world gold price, the retail price of SJC gold bars is currently higher by VND 13-13.2 million per tael, widening from the gap of VND 12.6 million per tael yesterday morning...

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Gold prices rose in Thursday’s trading session, despite a US GDP report that dampened investors’ hopes for a Federal Reserve interest rate cut. Domestic gold prices also increased this morning (April 26), with gold bars rising more sharply than gold rings.

Closing at the New York market, spot gold rose $16.5/oz, an increase of more than 0.7%, settling at $2,332.7/oz – according to data from the Kitco exchange.

A report from the US Department of Commerce showed that the country’s first-quarter GDP grew by 1.6%. This increase was much lower than the 2.4% growth forecast by economists in a survey by Dow Jones.

In addition to the bad news on growth, the report also contained negative news on inflation. The personal consumption expenditure (PCE) index – the Fed’s preferred measure of inflation – rose 3.4% year-over-year, a sharp acceleration from the 1.8% increase recorded in the previous quarter. This data raised concerns about the persistence of inflation and reinforced skepticism about whether the Fed could cut rates anytime soon.

After the GDP report was released, interest rate futures markets reflected the possibility of only one Fed rate cut this year – according to data from the CME’s FedWatch Tool.

Gold is a non-interest-bearing asset, so this shift in rate expectations put downward pressure on gold prices. In addition, US Treasury yields rose to their highest level in more than five months following the GDP report, putting further downward pressure on the precious metal.

“Gold is trading on the new data that says the Fed is not in a position to cut rates anytime soon,” said strategist Bob Haberkorn of RJO Futures.

Gold’s rise on Thursday was supported by a weaker US dollar and rising tensions in the Middle East.

The Dollar Index, which measures the strength of the greenback against a basket of six other major currencies, closed at 105.6, down from 105.9 in the previous session.

Geopolitical concerns resurfaced as Israel carried out airstrikes on Rafah in the Gaza Strip, in preparation for a possible ground invasion of the city. Israel’s move came despite warnings from allied countries that such a campaign would worsen the humanitarian crisis in Gaza.

Geopolitical risks were a key factor driving global gold prices to a record high of over $2,430/oz on April 12.

“After its explosive rally in recent weeks, gold is in a consolidation phase. It could break higher again if U.S. inflation moderates,” David Meger, director of metals trading at High Ridge Futures, told Reuters.

Gold is also being supported by central bank buying and solid physical demand from Chinese consumers. The latest data shows that China’s net gold imports via Hong Kong rose by 40% in March from the previous month.

On Friday, the US Commerce Department will release its March PCE report – another key data point that could influence the Fed’s rate outlook and gold prices.

The world’s largest gold ETF, SPDR Gold Trust, bought 1.2 tonnes of gold on Thursday, bringing its holdings to 834.8 tonnes. This week, the fund has purchased around 3 tonnes of gold.

Gold price movement over the past month. Unit: USD/oz –  Source: Trading Economics.

At nearly 9 am local time in Vietnam, spot gold in the Asian market was at $2,332.5/oz, down $0.2/oz from the US closing price – according to Kitco. This price is equivalent to more than 71.5 million VND/tael if converted at the selling rate at Vietcombank, an increase of 300,000 VND/tael compared to this morning.

At the same time, Phu Quy Group listed the price of SJC gold bars for the Hanoi market at 82.5 million VND/tael (buy) and 84.5 million VND/tael (sell), an increase of 700,000 VND/tael compared to early this morning.

Phu Quy’s 999.9 plain ring is priced at 73.9 million VND/tael and 75.6 million VND/tael, for buying and selling prices, respectively, an increase of 100,000 VND/tael compared to this morning.

Dragon Thang Long Jewelry Company’s 999.9 plain ring is priced at 73.88 million VND/tael and 75.48 million VND/tael, with the buying price increasing by 100,000 VND/tael but the selling price remaining unchanged compared to this morning.

In the Ho Chi Minh City market, SJC Company listed the price of gold bars of the same brand at 82.6 million VND/tael and 84.8 million VND/tael, an increase of 1.1 million VND/tael and 1 million VND/tael, respectively.

The 999.9 SJC plain ring is priced at 73.25 million VND/tael for buying and 74.95-75.05 million VND/tael for selling, depending on the weight of the product, an increase of 250,000 VND/tael and 150,000 VND/tael.

Compared to the converted world gold price, the retail price of SJC gold bars is currently higher by 13-13.2 million VND/tael, from a difference of 12.6 million VND/tael this morning.

The State Bank of Vietnam said that the gold auction scheduled for the morning of April 25 was canceled due to only one participant. Thus, out of the three gold bar auction sessions this week, two were canceled due to insufficient participants. The remaining session sold 3,400 taels of gold out of a total of 16,800 taels offered for sale.