GOLD PRICE RISES ON WEAK US ECONOMIC GROWTH, HIGH US INFLATION DATA

• Gold prices climb following US Q1 GDP results falling below expectations.
• Sharp increase in Q1 inflation to 3.7% tempers expectations for immediate Fed rate cuts and underpins higher Treasury yields.
• Fed officials maintain cautious stance on monetary policy, echoing concerns over persistent inflation pressure.

Gold prices advanced modestly during Thursday’s North American session, gaining more than 0.5% following the release of crucial economic data from the United States (US). GDP figures for the first quarter of 2024 missed estimates, increasing speculation that the US Federal Reserve (Fed) could lower borrowing costs. However, inflation for the same period jumped sharply, which would delay interest rate cuts by the Fed.

XAU/USD trades at $2,330 after bouncing off daily lows of $2,305 amid higher US Treasury yields, courtesy of the reacceleration of inflation. As expected by analysts, the US economy would slow down in 2024, but it missed the mark by a full percentage point in the first quarter. That would keep the “soft landing” narrative in place, but underlying inflation for Q1 2024 rose by 3.7% QoQ, above estimates and crushing the 2% registered in the last quarter of 2023.

This justified Fed officials' change of stance last week. Chairman Jerome Powell gave the green light when he commented, "Recent data shows lack of further progress on inflation this year.”

Those words were echoed by a slew of policymakers, most significantly by the ultra-dovish Chicago Fed President, Austan Goolsbee, who said, “Fed's current restrictive monetary policy is appropriate.”