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Gold challenges record highs post ECB, US GDP

  • The European Central Bank trimmed interest rates by 25 bps as widely anticipated.
  • The preliminary estimate of the Q4 Gross Domestic Product resulted weaker than anticipated.
  • XAU/USD pressures record highs and is on its way to test the $2,800 threshold.

XAU/USD trades dangerously close to its record high in the $2,790 region as the latest macroeconomic developments put pressure on the US Dollar (USD).

Ahead of Wall Street’s opening, the European Central Bank (ECB) announced its decision on monetary policy. The ECB lowered key rates by 25 basis points (bps) each, as expected. With this decision, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility stood at 2.9%, 3.15% and 2.75%, respectively.

The accompanying statement and the subsequent President Christine Lagarde’s press conference showed that European policymakers are still concerned about economic progress, although not that concerned about inflation. The presser had a dovish tilt and left the door open for additional rate cuts in the upcoming months.

At the same time, The United States (US) released the first preliminary of the Q4 Gross Domestic Product (GDP), which showed that the economy grew at an annualized pace of 2.3% in the three months to December, below the 2.6% expected and the 3.1% posted in Q3. Additionally, the core Personal Consumption Expenditures Price Index increased by 2.5% on a quarterly basis, matching the market consensus. The  US also published Initial Jobless Claims for the week ended January 24, which unexpectedly improved to 207K from the previous 223K.

The weak growth-related data further undermined USD demand.

XAU/USD technical outlook

The bright metal is nearing its all-time high at $2,790.11 and seems poised to run beyond it, towards the $2,800 mark, the initial natural target. Sellers are likely to reappear around the latter, albeit the dominant market sentiment should keep the bullish trend alive. Additional gains in the near term should see XAU/USD reach the $2,810/20 region.

Pullbacks will likely attract buyers, with a near-term support level at $2,771.90, Jan 27 intraday high. As long as the area holds, bulls will retain control. 

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USD/JPY falls as US GDP misses estimates bolstering Yen

The USD/JPY retreats in early trading during the North American session after economic data showed the US economy grew lower than expected a day after the Federal Reserve (Fed) decided to keep rates unchanged.
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