Strong US Data And Profit-Taking Fuel Gold Sell-Off
The gold (XAU) price plunged by 1.38% on Thursday as the US Dollar Index (DXY) recovered swiftly from the 104.000 level due to better-than-expected US macro statistics.
Yesterday’s US macroeconomic reports showed a solid 2.8% annualized Gross Domestic Product (GDP) growth in Q2.
Core durable goods orders rose by 0.5% in June—the fastest since January 2024—while initial jobless claims remained relatively stable.
The better-than-expected data supported the US dollar (USD), damaging gold's appeal even as traders continue to expect an interest rate cut by the Federal Reserve (Fed) in September.
Also, traders attribute the decline in XAU/USD to technical profit-taking.
"There's definitely some profit taking going on, triggered by the weakness in the US equity markets that was more than just a sell-off", said Marex analyst Edward Meir. "We've been on a steep rise in the gold and silver market as of late so a combination of long liquidation and profit taking from the recent runs exacerbated the selling pressure", said David Meger, director of alternative investments and trading at High Ridge Futures.
At the same time, weakness emerged in the physical market as well. According to official customs data, China's gold imports through Hong Kong decreased by 18% in June compared to May, as higher gold prices dampened jewelry demand.
XAU/USD was rising during the Asian and early European trading sessions. Today, traders await the US Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation indicator, due at 12:30 p.m. UTC.
The data is important as it could clarify when the Fed will cut interest rates. According to Reuters, the market expects a 0.1% monthly core PCE rise and a 2.5% annual increase.
Higher-than-expected figures will almost certainly pull DXY above 104.500, negatively affecting all precious metals. Otherwise, the short-term bearish trend in XAU/USD will continue, and the pair may drop towards $2,336.
"Spot gold may test resistance at $2,382 per ounce, a break above which could open the way towards $2,389–$2,394 range", said Reuters analyst Wang Tao.
Euro Moves Sideways Ahead Of The US PCE Data
On Thursday, EUR/USD moved within the 1.08300–1.08650 range and gained 0.05%. The US Dollar Index (DXY) gained 0.07% and closed just below the 104.400 resistance level.
The advance estimate of the US Gross Domestic Product (GDP) Growth Rate for Q2 showed an increase of 2.8%, exceeding the expected 2% and the previous quarter's result of 1.4%.
Meanwhile, initial unemployment claims decreased to 235,000, below the forecast of 238,000, from an upwardly revised figure of 245,000. Headline durable goods production significantly decreased but remained above expectations.
Today's US PCE report for June could disrupt the current technical balance. The market expects the month-on-month PCE to increase by 0.1%, compared to 0% in May, while year-on-year PCE may decrease from 2.6% in May to 2.5% in June.
The Federal Reserve (Fed) was satisfied with recent economic data indicating the disinflation. However, any upward surprise in the PCE data will reinforce EUR/USD bears.
"The US economy has not run out of steam just yet, despite having restrictive interest rates for quite some time", said Kristina Clifton, a senior economist at Commonwealth Bank of Australia.
She anticipates the first rate cut in November:
"We expect that the FOMC will require a long string of lower inflation readings before easing interest rates".
EUR/USD has been trading bullish during the Asian and early European trading sessions. The pair consolidated just below the 1.08600–1.08650 resistance zone. The US PCE Price Index report will come out today at 12:30 p.m. UTC.
A higher-than-expected number will exert bearish pressure on EUR/USD, while a figure lower than the forecast will suggest a bullish outlook for the pair.
Bitcoin Rebounds From $64,000 In Anticipation Of Trump’s Pro-Crypto Statement
On Thursday, Bitcoin (BTC) rebounded from the $64,000 support level after falling on Tuesday amid a stock market fall and worsening sentiment for risk assets, including cryptocurrencies.
BTC's decline towards $64,000 resulted in the liquidation of over $250 million in long positions, marking it the most significant hit since early July. Overall, BTC/USD has fallen by 6% over the past three days.
The decline came after the NASDAQ 100 Index experienced its largest drop since 2022, following mixed quarterly earnings reports from Alphabet—Google's parent company—and Tesla. So far, the pair continues to hold above the $64,000 level, providing a positive signal for bulls.
Recent macroeconomic data has further dampened crypto investors' sentiment. The US economy grew at an annualized rate of 2.8% in Q2, surpassing the forecast of 1.9%.
The upbeat Gross Domestic Product (GDP) report suggests that the Federal Reserve (Fed) has successfully defeated inflation without triggering a recession.
This can be a negative development for BTC, as part of its appeal lies in being a hedge against inflation, a depreciating US dollar, and decreased confidence in US Treasuries. Thus, a strong US economy makes alternative assets like BTC less attractive for investors.
BTC/USD rose this morning as former President Donald Trump will deliver a keynote speech at the 2024 Bitcoin Conference this weekend. Speculation is growing that Trump may announce Bitcoin as a strategic reserve asset for the US, potentially significantly impacting the cryptocurrency industry.
Trump's pro-crypto stance has grown recently. He launched an NFT collection on Solana and named Ohio Senator James David Vance, a crypto advocate, his running mate.
Traders should focus on the conference to gain insights into the potential future of the crypto market.