Gold jumped to a new 6-week high in the wake of this morning’s disappointing Q2 GDP data. The dollar has already retraced most of yesterday’s bounce, lending ongoing support to the yellow metal.
The advance Q2 GDP print was in line with expectations of 2.6%, but Q1 growth was revised back down to 1.2%. ECI rose 0.5%, below expectations of +0.6%, versus +0.8% in Q1.
Perhaps most importantly, core PCE rose just 0.9% in Q2, down from 1.8% in Q1. This is the Fed’s preferred measure of inflation, suggesting that the probability of a September rate hike is properly priced at zero. However, the stark decline is going to start raising doubts about December and the balance sheet unwind as well.
Now the question becomes; is this Q2 rebound in growth — albeit modest — even sustainable? A third of the way through Q3, the data have been less than impressive and let’s be honest, we’re way past due for a recession.
As economic uncertainty persists, gold will continue to attract safe-haven interest. If incoming data continues to disappoint, the yellow metal may really start to run.