**Gold Surges Above $2,360 as Softer GDP and Persistent PCE Inflation Weaken US Dollar**
*Based on the article by Christian Borjon Valencia at FXStreet, with additional analysis and context from recent financial reports and economist commentary.*
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Gold prices surged above the $2,360 mark on Thursday, supported by a combination of weaker-than-expected US GDP growth data for the first quarter and persistent inflation concerns reflected in the Personal Consumption Expenditures (PCE) report. This movement not only highlights gold’s role as a traditional hedge against economic uncertainty and inflation but also underscores the shifting sentiment in the currency and bond markets, which are closely monitoring the Federal Reserve’s upcoming policy decisions.
### **US Macroeconomic Data Catalyzes Gold’s Rally**
The US economic landscape provided the primary backdrop for gold’s rally on Thursday:
– The US Bureau of Economic Analysis (BEA) reported that real Gross Domestic Product (GDP) grew at just 1.3% in the first quarter of 2024, a downward revision from the initial 1.6% estimate, indicating weaker economic momentum than anticipated.
– In tandem, the core Personal Consumption Expenditures (PCE) price index, which strips out food and energy and is favored by the Federal Reserve as an inflation gauge, rose by an annual rate of 3.6%—matching forecast but remaining significantly above the Fed’s 2% target.
– Initial jobless claims for the week ending May 25 fell slightly to 219,000 but remain within a range that suggests moderate labor market softening.
These data points, particularly the softer GDP print combined with sticky inflation, have reignited expectations that the US central bank may ease monetary policy later in the year. The resulting pullback in the US dollar and declining Treasury yields provided tailwinds for gold’s ascent.
### **Treasury Yields and Dollar Retreat on Policy Shift Bets**
Following the economic reports, US Treasury yields retreated across the curve, with the benchmark 10-year note falling below 4.55%. The US Dollar Index (DXY), which measures the greenback’s value against a basket of major currencies, dropped below 104.50 in response.
Market participants are interpreting the data as signaling the Federal Reserve may soon gain enough confidence to commence rate cuts, potentially as early as September 2024. According to the CME FedWatch Tool, the probability of a September rate cut climbed above 55% after the GDP release.
This shift in expectations has crucial implications for gold:
– Lower interest rates and bond yields reduce the opportunity cost of holding non-yielding assets such as gold.
– A weaker dollar makes gold cheaper for foreign buyers, boosting international demand.
### **Gold Technical Analysis: Bulls Regain Control**
Spot gold (XAU/USD) traded as high as $2,364 during Thursday’s session, marking a rebound after recent consolidation. Technically, the metal remains within a broader uptrend, buoy
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