The Daily Market Report: Gold Well Within Range Ahead of Second Look at Q1 GDP

28-May (USAGOLD) — Gold edged modestly lower in New York trading, but remains confined to the well established range. The dollar index was consolidative, even as the yen continued to fall against the greenback.

The USD-JPY rate extended to 12½-year highs, reaching 124.45; a level last seen in late-2002. The recent plunge in the yen is being driven by rising expectations of further BoJ measures to debase the currency. Meanwhile, expectations that the Fed may raise rates persist, even amid predictions that the Q1 GDP second report will show that the U.S. economy contracted by about 1% in the first 3-months of the year.

The preliminary Q1 GDP print was a mere +0.2%, but data that came out subsequently revealed that growth was far weaker than even that well-below-consensus read. The Q2 data that we’ve seen thus far suggests that the much ballyhooed recovery into mid-year remains elusive. Of course, those calling for a Q2 recovery are the same one’s that were calling for 1-2% growth in Q1!

Tomorrow’s GDP report may cause an unwind of market positioning triggered by Fed chair Yellen’s hawkish comments from last Friday. It will be hard to cling to those 2015 rate lift-off expectations if the economy contracted by a percent or more in Q1, with no real signs of a rebound in Q2.