Bullion dropped on Friday, trying to breach the support area around $1,080 and confirm the bearish bias.
London - Gold was seen dropping on Friday, changing hands around $1,080 as traders continue to sell every small rally and hold the price below the psychological $1,100 resistance.
On Thursday, the first estimate of US GDP for the second quarter improved from 0.6% to 2.3% and confirmed the solid growth of the US economy after the anemic result in Q1. However, analysts had expected a 2.6% reading, with the Q1 GDP revised from -0.2% to 0.6%.
In addition, the PCE index (Personal Consumption Expenditure) increased to 2.9% on a quarterly basis, beating the expectation of 2.7%, and increasing from a revised 1.8% seen during the first quarter of 2015.
Relatively solid GDP data added to expectations that the chances for a September rate hike are still well alive and traders will watch every number from the US economy very closely from now on.
Prices of gold are further suppressed by the strengthening greenback. The EUR/USD pair is slowly fading and was trading below the $1.10 handle, while USD/JPY is trying to breach the ¥125 resistance.
A further downside is therefore very likely and the price should drop more to test $1,000, where the real fight begins.
"US Q2 GDP was a mixed bag. The headline was slightly lower than expected at 2.3% QoQ annualized, but the previously shocking drop in Q1 was revised up to 0.6%. Once again it was consumer spending and real estate rather than business spending that did the lifting: yet both of those are still well below pre-crisis trends," analysts at Rabobank wrote on Friday.
