Tuesday morning saw gold prices give back all of their gains to begin the week. The yellow metal dropped more than $10 per ounce when markets opened in New York on the news that third-quarter GDP for the U.S. economy was revised sharply upward. However, gold recovered a bit as we approached 10 am EST, trading nearly 0.55% in the red at $1,187/oz Spot silver likewise lost about 0.55% to slip below $16.60/oz.
After initially being reported at 2.9%, which was already far above expectations, the gross domestic product (GDP) estimate for Q3 was revised to 3.2%. This was largely attributed to stronger consumer spending during the quarter: Personal consumption surged 2.8% in this second estimate of GDP.
Exports during Q3 were supported by a surge in soybean shipments to South America. The Commerce Department reported that salaries and wages grew by over $110 billion compared to the previous quarter, roughly double what experts had forecast.
There are still concerns about depressed levels of business investment. The third quarter did finally see the return of modest growth in corporate profits following six consecutive quarters of contraction for the profits of S&P 500 companies.
With retail sales on the Cyber Monday “shopping holiday” coming in above initial projections, the strength of the U.S. consumer to prop up the economy seems likely to continue through the end of the year. Spending on Cyber Monday set a new record-high at $3.45 billion, better than 12% higher year-on-year.
Gold Market Absorbs the News
The rosier outlook for the economy when looking back at the third quarter helped the dollar reverse course still higher. The greenback rose slightly overnight, a trend that continued into trading this morning. The DXY index stood at 101.4.
In general, the stronger the dollar is, the worse it is for gold prices. This current USD rally is a large contributor to gold remaining stuck below $1,200/oz. From a technical standpoint, the gold market is showing a robust floor of support around the $1,180-per-ounce level. This could be a fairly optimistic indicator: Consider that every higher GDP estimate (and every “good” economic number) raises expectations for a December rate hike from the Federal Reserve—expectations which were already sky-high. As this pressures the dollar doubly higher, it’s safe to say the strong dollar and rising interest rates are already baked into the current gold price. Don’t anticipate another significant selloff when the Fed moves at its December meeting.
In the paper gold markets, investors pulled money out of the SPDR Gold Trust (GLD) for five straight sessions last week, totaling $1.4 billion in outflows. This was the biggest rush out of the largest gold ETF since 2013. This similarly shows that virtually all of the “hot money” has exited the gold trade
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.