The gross domestic product (GDP) is a key metric of economic growth. Due on September 26, the upcoming release of the US GDP Q2 2024 (3rd estimate) fuels markets’ anticipation as economic forecasts grab the headlines.
The upcoming estimate for real US GDP growth seasonally adjusted annual rate (SAAR) in the 3rd quarter of 2024 points to 2.9%, according to the GDPNow model employed by the Federal Reserve Bank of Atlanta, taking into account the economic data available on September 18. This represents a 3% drop from September 17’s estimate.
The US Census Bureau’s latest housing starts report also shows a decline in the real gross private domestic investment growth from 3.2% to 2.8% as homebuyers’ sentiment eroded in Q3.
The US economy is expected to slow down in H2 2024 amid sapping domestic demand.
Elevated prices and high interest rates are among the key drivers of the economic sluggishness, which according to the Conference Board Economic Forecast for the US Economy, will head into 2025. Year-over-year, this may limit growth to a meagre 1.7% despite expectations of stronger quarterly annualised data as the year advances. Nevertheless, the US is not facing a recession, the Board underscores.
What’s happening with the US dollar?
The US dollar gained momentum against its major peers ahead of the weekend amid hopes for robust economic data. In addition, the Fed’s 50 bps rate cut last Wednesday and its indication that further actions will be dictated by the economic climate have also provided support to the greenback. Let’s see how the buck performed against some of its major peers:
- EURUSD consolidated weekly gains just above 1.1150.
- GBPUSD stabilised in the 1.3300 territory, posting moderate gains
- USDJPY climbed above 144.00 as the Bank of Japan refrained from announcing further rate cuts this year.
- AUDUSD also edged higher with the pair ending the week above 0.6800 as traders factored in the Fed’s rate cut. Another key factor contributing to the Buck-Aussie pair advancement is the RBA’s firm stance regarding interest rates, with no rate trims in sight for 2024.
- USDCAD consolidated near the 1.3600 territory, as the Loonie benefited from little support from BoC’s Governor Tiff Macklem’s speech.
Gold shimmers from a new record high
Gold prices climbed to fresh tops above $2600 an ounce, setting a new all-time high last week, amid guesstimates of further Fed rate trims and spiralling tensions between Israel and Hezbollah.
XAUUSD gained 1.37%, hovering in the $2,621 area. The recent gain brings the overall gold price increase to a staggering 27% in 2024, marking the highest annual rise since 2010.
The main drivers behind the yellow metal’s spectacular performance remain China and India’s demand for physical gold, which has outshined any timid investments in Gold-backed ETFs.
Additionally, economists’ projections broadly speak about the Fed steering interest rates towards 4.4% in 2024 and 3.4% in 2025.
Meanwhile, inflation as measured by the Core Personal Consumption Expenditures Price Index (CPI), is projected to reach the 2%set target by 2026. This will happen gradually, with estimations pointing to 2.6% in 2024 and 2.2% in 2025.
Is the recent gold surge a sign of recession?
No. Although traditionally correlated with the US dollar, gold is regarded as a safe-haven asset in times of market turbulence or even recession. Typically, when gold rises, the US dollar declines and vice-versa.
However, this is not a hard-and-fast rule. In fact, the precious metal’s recent upswing shows no correlation with the buck’s performance or that of the US 10-year Treasury yields, which also rose by 1.5 bps.
As there is little support from the fundamentals for a gold price peak, analysts suggest there may be a bull trap and a downward correction may be near. Yet, it remains to be seen how far (or close) in sight that is.
In the meantime, traders look forward to the US GDP data as the main economic driver dictating the greenback’s and gold’s price direction. Watch this space for more trading updates and be sure to follow TibiGlobe on Threads, X, Instagram, Facebook and LinkedIn.
Originally published on TibiGlobe’s Official Medium page.
