Gold futures, the U.S. dollar and speculation about when the Federal Reserve will increase the interest rates are intricately linked together with gold and the dollar both on a pendulum controlled by investor sentiment with regard to the timing of a Fed rates move.
The latest fundamental data releases in the U.S., such as the GDP coming in at an impressive 3.7% growth for the second quarter of 2015, an increase of 3.1% in personal consumption for the same period and the latest Labor Department initial claims for Unemployment Insurance numbers down by 6,000 to 271,000, all point to an earlier rates hike, possibly in September. This is the 25th consecutive week that the jobless claims numbers have remained below the 300,000 level.
This data shows that the United States economy is definitely back on the move and growing at an ever increasing pace as it continues its recovery from the Great Recession.
This news placed pressure on gold futures with gold for December delivery on the Comex division of the NYMEX dropping by $3.50 to trade at $1,121.10 an ounce after touching $1,119.10, which was the low for the day.
Meanwhile, the ICE Dollar Index, which measures the U.S. currency against a basket of six major currencies, was up 0.45% in early trade on Thursday to a reading of 95.75.
Federal Reserve Vice Chairman Stanley Fischer, who is due to address a conference of leading central bank governors on the weekend on the subject of inflation, will be closely followed by investors. Fischer has expressed the view that any rates hike must wait until inflation shows definite signs of moving up to the 2% level sought by the Fed and his comments might provide an insight into what action the Fed may take and when this is likely to happen.
The slowing rate of growth of the Chinese economy, coupled with the recent shock devaluation which unsettled markets globally and might negatively affect U.S. inflation, are other factors that might delay a Fed decision on rates.
MT4 Chart: Gold