Daily digest market movers: Gold price likely set for bearish weekly close

Gold price moves higher to the crucial resistance of $2,350. The precious metal got some relief from a weakening US Dollar, which suffered from a weaker-than-expected US economic growth rate for Q1. The US economy grew at an annualized pace of 1.6%, lower than the consensus of 2.5% and the former reading of 3.4%. This has raised concerns over the US economic outlook.

Generally, a sharp decline in GDP growth could be the consequence of one or more factors such as weak household spending, limited monetary stimulus or less government spending. In theory, weaker-than-expected GDP growth should have boosted expectations for the Federal Reserve (Fed) to roll back its restrictive monetary policy stance, which it is maintaining since the strong stimulus due to the Covid-19 pandemic prompted inflationary pressures to historic levels.

However, traders continued to pare back Fed rate cut bets due to stubbornly higher GDP Price Index data, which is a lagging inflation indicator. The inflation measure rose to 3.1% from the prior reading of 1.7%. The CME Fedwatch tool shows there is a 59% chance of a rate cut in September, down from the 69% recorded a week ago.

Meanwhile, investors shift focus to the US core PCE Price Index data for March, which could provide more cues about when the Fed could start reducing interest rates. The underlying inflation data will also influence the Fed’s interest rate outlook ahead of the monetary policy meeting on May 1, in which the US central bank is widely anticipated to keep interest rates unchanged in the range of 5.25%-5.50%.