Gold gains as Treasury yields drop after US GDP data

Jan 25 – Gold edged higher on Thursday as Treasury yields fell after US GDP data highlighted that pace of inflation slowed, while the focus shifted to inflation data for further hints on the Federal Reserve’s interest rate cut strategy.

Spot gold rose 0.2% to USD 2,015.56 per ounce by 1:49 p.m. ET (1849 GMT). US gold futures settled 0.1% higher at USD 2,017.8.

Benchmark 10-year Treasury yields slipped after the GDP data.

The US economy grew faster than expected in the fourth quarter amid strong consumer spending, with growth for the full year coming in at 2.5%. The report also showed fourth-quarter inflation pressures subsiding.

“The economy is running a lot hotter than expected, but at the same time, we are having a situation where inflation is coming down, therefore we shouldn’t prepare for a big spike in interest rates,” Bart Melek, head of commodity strategies at TD Securities, said, adding that it was helping gold.

Lower interest rates decrease the opportunity cost of holding bullion.

Markets widely expect the Fed to hold rates unchanged at its policy meeting on Jan. 30-31 and are expecting an 89% rate cut by May, according to the CME FedWatch Tool.

Gold also got some support from a separate report that showed initial claims for state unemployment benefits in the United States increased 25,000 to a seasonally adjusted 214,000 for the week ended Jan. 20. Economists had forecast 200,000 claims in the latest week.

“The initial jobless claims data says that the jobs picture is deteriorating, labor markets cooling, that is helping gold,” said Phillip Streible, chief market strategist at Blue Line Futures, in Chicago.

Focus now shifts to the US personal consumption expenditure (PCE) data due on Friday.

Spot silver rose 0.7% to USD 22.81 per ounce, while platinum dipped 1.2% to USD 888.59 and palladium fell 2.5% to USD 938.39.

(Reporting by Anushree Mukherjee and Ashitha Shivaprasad in Bengaluru; Editing by Shilpi Majumdar)