Gold dips as steady US economic data fuels rate hike expectations

The US Bureau of Economic Analysis confirmed second-quarter growth remained at 1.5%, a deceleration from the 2.1% recorded in the first quarter. While the headline GDP figure met economist expectations, the accompanying GDP Price Index climbed to 6.4%, surpassing initial estimates of 6.2%. This suggests that inflationary headwinds remain a persistent factor for the broader economy.

Contrasting the sharp rise in quarterly price indices, the Federal Reserve’s preferred inflation gauge showed more moderate movement. Core Personal Consumption Expenditures, which strips out volatile food and energy costs, rose 0.2% in July, aligning with consensus forecasts. On an annual basis, core inflation reached 3.3%, while headline inflation climbed 3.7% over the last 12 months, slightly exceeding the projected 3.6% increase.

Gold markets reacted with immediate selling pressure following the release. Spot gold fell 0.75% to trade at $4,623.50 per ounce. Despite the retreat, the metal maintains a critical support level above $4,600. Market analysts interpret the decline as a tactical withdrawal by investors rather than a fundamental shift in sentiment, noting that the combination of steady growth and persistent inflation provides the Federal Reserve with ample room to continue its current tightening cycle.