Gold firmed last night, climbing in a range of $1277.50 - $1283.20 and fading a modest decline in the torrid US dollar (DX from 98.24 – 98.08). The DX was pressured by a recovery in the euro from 22-month lows ($1.1124 - $1.1147) and the pound ($1.2888 - $1.2917) which overcame some softness in the yen (111.44 – 111.78, weaker Japanese Industrial Production, Employment, covering ahead of Golden Week). Gold also was lifted by an edge down in the US 10-year bond yield (2.54% - 2.52%), and mostly weaker global equities. The NIKKEI was down 0.2%, the SCI was off 1.2%, Eurozone shares ranged from -0.3% to +0.1% ,and S&P futures were off 0.1%. A pullback in oil (WTI from $65.25 - $63.92, technical selling under $65) weighed on stocks.
The headline GDP Report at 8:30 AM was a large beat – 3.2% vs. exp. 2.3%. The knee-jerk reaction from algorithmic trading took S&P futures higher (+7 to 2933), and sent the DX to 98.35, taking out yesterday’s 98.34 top to make a fresh 23-month high. Gold initially tumbled in response, reaching $1274.70.
However, upon a closer look, the upside beat was driven by net trade (exports jumped while imports contracted sharply, with inventories contributing to 170bp of the rise. Personal Consumption was lower than last quarter (1.2% vs. 2.5% last), and the GDP Price Index (0.9% vs. exp. 1.2%) and Core PCE were worse than expected (1.3% vs. exp. 1.6%). S&P futures reversed (-5 to 2921, hurt also by a further dip in oil -WTI to $63.22) and the US 10-year bond yield sank to 2.498% - focusing on the softer inflation components. The DX sank to 97.97 and gold popped higher. The yellow metal tripped buy stops over $1283 (last night’s and yesterday’s...