Gold recovers following US GDP data

Gold is 0.26% up, trading at 2,343.18 per ounce at the time of writing. The precious metal‘s price has recovered after the US dollar weakens following the release of revised Q1 GDP data. The revised data suggests the US economy is not as strong as analysts had previously thought, potentially indicating declining inflation. This could lead the Federal Reserve to lower interest rates, which reduces the opportunity cost of holding gold. However, Gold remains vulnerable due to comments from Fed officials suggesting that US interest rates are set to remain high and higher-than-expected inflation readings in Europe.

Minneapolis Fed President Neel Kashkari surprised markets by stating that Fed officials had not disregarded hiking interest rates and added that if the Fed did cut borrowing costs, it would be twice toward the end of 2024. German and Spanish inflation data showed higher-than-expected readings in Europe, reducing the probability that the European Central Bank (ECB) will follow their June interest rate cut with further cuts.

The preliminary Harmonized Index of Consumer Prices (HICP) in Germany and Spain rose by 2.8% year-over-year in May, beating economists’ expectations of 2.7% and the previous 2.4% reading. Eurozone-wide HICP is expected to show an above-consensus reading when released on Friday, prompting the ECB to put the breaks on lowering interest rates to manage persistent inflationary pressures.

Gold price has broken out of a rectangular formation, likely a Bear Flag continuation price pattern formed between May 24 and 27. Bear Flags look like upside-down flags composed of a sharp decline and the consolidation phase or flag square.