However, the latest statements from the US Federal Reserve also signal that a US interest rate hike is coming closer, hence giving rise to a stronger US dollar at the expense of most global currencies and the gold price.
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While recent economic data has raised the chances of a US rate increase, some analysts caution that Greece’s unresolved debt woes and turmoil in China’s financial markets may worsen, forcing the Fed to postpone a rate hike in September. That is because shorter-dated bond yields are pinned by the Fed’s short-term policy rate so they are more vulnerable to a shift in the Fed’s policy.
The Dow Jones industrial average was up 99 points, or 0.5 percent, to 17,726 as of 2:30 p.m. Eastern.
The economy’s total output of goods and services rebounded to a respectable annual rate of 2.3 percent in the April-June quarter, the best showing since last summer. That left the door open for a possible rate hike when policymakers next meet in September.
After breaching the US$1,100 support level, gold has found it tough to recover and stay above that mark, indicating bearish investors continued to hover in the market.
The Fed has kept its benchmark interest rate near zero since December 2008.
And while the unemployment rate, at 5.3 per cent, is nearly normal, other gauges of the job market remain less than healthy.
While the US job market, housing and consumer spending have all showed an improvement, the US central bank wants to see higher inflation (toward the institution’s 2 percent y/y target) before implementing further monetary tightening. The Fed is hoping inflation will show signs of moving up toward its 2 per cent goal, which it has persistently undershot. The index is a measure of the dollar against a basket of major currencies.
Spot gold dropped as much as 1.3 per cent to a session low of $US1,081.85 an ounce in earlier trading, not far from its cheapest since February 2010 at $US1,077 hit after a selloff on July 20.
“It is true that there is no press conference scheduled after the statement and this usually downgrades the elements of surprise”, Naeem Aslam, chief market analyst at AvaTrade, said in a note.
Holdings of the largest gold-backed exchange-traded-fund, New York’s SPDR Gold Trust, were unchanged at 21.87 million ounces for a second day on Tuesday. On Thursday, the euro had slipped to $1.08935, its lowest level in more than a week, pressured by the greenback’s firm tone.
With just over half of S&P 500 companies having reported second-quarter results, 73 per cent have been above expectations, compared with a 70 per cent beat rate over the past four quarters, according to Thomson Reuters data.
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Brent crude was 0.4% higher at $53.58 per barrel.
