Gold Prices Underpinned By Subdued US Inflation Data, Dollar Falters Again

New York (July 28)  The dollar was unable to gain any sustained recovery which helped underpin gold sentiment, especially with readings suggesting low inflation pressure in the US economy.

Gold came under pressure during US trading with sharp dollar gains pushing prices to lows below $1,255 per ounce.

Equities came under some pressure after the European close on Thursday with a slide in technology stocks undermining confidence, although there was a rebound in the S&P 500 index at the close which limited support for gold.

The dollar was also unable to sustain a recovery against major currencies with a sharp retreat in USD/JPY which also triggered demand for precious metals and gold edged back to the $1,260 per ounce area.

Consolidation was the main feature in Asia with a lack of fresh incentives.

European bond yields moved higher ahead of the US open on Friday which triggered an element of selling pressure on gold, although overall selling pressure was limited.

The US GDP data was in line with expectations with a 2.6% annualised growth rate for the second quarter following a revised 1.2% expansion for the first quarter. There was a stronger reading for consumer spending with investment and net exports also making a positive contribution.

The GDP prices index was weaker than expected and the employment cost index was held to 0.5% for the second quarter which dampened inflation expectations.

Market reaction was subdued with the dollar unable to gain any sustained traction and gold pushed higher in an immediate response with 6-week highs above $1,265 per ounce as bond yields also drifted lower.

Overall dollar losses were limited, but there was evidence of increased investor support for gold as prices held above $1,265 per ounce.

Position adjustment will be an important factor late in the European session and the latest COT data will also be monitored closely late in US trading.

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