World gold prices plummet due to US GDP

US economic growth in the second quarter was stronger than expected, causing world gold prices to drop nearly $30 an ounce on the evening of July 27.

The world spot gold price has fallen more than 29 USD to 1,942 USD per ounce. The precious metal plunged at the beginning of the US session, after the country's second quarter GDP data was announced.

The US Commerce Department said today that the country's second-quarter GDP increased by 2.4% (adjusted on an annual basis), a faster pace than the first quarter and larger than the forecast of analysts in a survey by data firm Refinitiv (1.8%).

World gold prices fell sharply in the session on July 27.

US GDP data suggests the Federal Reserve may need to raise interest rates again to cool the economy. The Fed raised interest rates by 25 basis points (0.25%) on July 26, bringing the benchmark interest rate to a 22-year high. Higher interest rates will make non-interest-bearing assets - such as gold - less attractive.

Fed Chairman Jerome Powell's remarks at a press conference afterward suggested a stance that was neither too tight nor too loose. Markets were also flat this morning. Some observers believe the Fed has completed its rate hikes, but others predict another rate hike in November.

Another factor affecting gold prices was a report from the US Department of Labor on July 27. Accordingly, the number of initial unemployment claims last week decreased by 7,000 compared to the previous week.

"Gold is suffering a double shock. The jobless claims numbers show a stronger-than-expected job market. The GDP numbers show that the US is unlikely to enter a recession at this time. These developments will pave the way for a rate hike," said Phillip Streible, chief strategist at Blue Line Futures.

After the US GDP was released, the Dollar Index – which measures the greenback’s strength against a basket of major currencies – rose 0.7% against its rivals. The stronger dollar makes gold more expensive for buyers with other currencies. The yield on the 10-year US government bond also rose to 3.9%.

Ha Thu (according to Reuters, Kitco)

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