The U.S. economy is seemingly doing better than expected as in the fourth quarter financial indicators pointed solid consumer and business spending.
Yesterday, the Gross domestic product growth rate, was released with a figure of 2.6 percent annualized rate related to the fourth quarter after expanding at a 3.4 percent pace in the July-September period.
An average count for 2018 indicates the US economy grew by 2.9 percent, with many analysts arguing that the White House’s $1.5 trillion tax cut was behind this positive figure and increased government spending.
Also, the initial forecasted GDP rate, was expected to rise at a 2.3 percent rate in the fourth quarter.
Most notably, it was the best performance since 2015 and better than the 2.2 percent logged in 2017 which creates a favorable sentiment for the economy currently.
Fears of a slowdown prevail despite the economy’s strong performance in the last quarter and in 2018, as there are indications that activity could be moderating, with most manufacturing measures weakening in January and February and the Fed being solidifying in a wait and see position.
Gold as major safe haven, weakened as the market digested the news with its drop persisting until today in the European morning.
The precious metal has now dropped for the fifth consecutive day.
For the month, the futures contract was down about 1%.
US Sino Trade Relationship
Another matter which has had strong effect on the shiny metal is the US Sino matter which remains in uncertainty despite talk taking place consistently.
From the Chinese side comments indicate that concrete improvement has taken place through the talks.
From the US side President Trump left the door open for any scenario, saying the Chinese talks could or could not lead to a deal.
From what we observed so far, positive news leaning towards a US Sino deal has motivated bullish momentum for the shiny metal, while any news focusing on disagreement has sent in the bears.
However, the latest updates have touched a very sensitive matter which both countries will need some time to sort out, in our opinion.
White House officials have stated on Thursday that China would need to report any intervention in the foreign exchange market under a currency deal being negotiated with the United States.
Currency is among the most important matters discussed in trade talks between China and the United States.
Furthermore on the same issue, during the past days, the United States won a World Trade Organization ruling when they challenged the Mainland’s price support for agriculture products.
A WTO adjudication panel agreed on Thursday with the U.S. complaint against China.
From our point of view, the more pressure the US applies to the Chinese government, the more we could see Bullion depreciating as the risk sentiment could rise substantially, strengthening the USD.
US President exiting meeting with North Korean leader
At this point we would like to include our view on US president Trump unexpectedly exiting the Vietnam meeting with North Korean leader as the fact could have also assisted in the oversold Gold trend formed since yesterday.
Until now relationships between them had been positive, but after the talk was suddenly broken with President Trump returning to the US, we could have new developments on the issue and many scenarios are possible that could uplift risk sentiment.
Gold has moved on the downside in the previous days, but will the precious metal remain lower or looking to rebound shortly (?), as it has the tendency to make large corrections and send vital messages.
Gold Technical Analysis
If the selling trend is to remain unbroken then the precious metal could move below the (S1) 1306.67 support level while even lower we could find the (S2) 1301.59 support barrier.
A step even lower could mean a break below the 1300 round number, with the next price being the (S3) 1295.30 support barrier.
Bullion could also maintain its sideways movement between the (R1) 1317.55 resistance line and the (S1) 1306.67 support line.
If a buying trend is to be formed, we may see Bullion aiming for the (R1) 1317.55 resistance level.
Higher, we could find the (R2) 1322.68 resistance barrier and surpassing it, we could reach the (R3) 1326.91 resistance hurdle.