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Gold rebounds after U.S. GDP disappoints, set for monthly gain

A worker pours molten gold into 25 kilogramm molds at the Verninsky GOK gold mine and processing plant, operated by Polyus Gold International Ltd., near Bodaybo, Russia.
Andrey Rudakov | Bloomberg | Getty Images
A worker pours molten gold into 25 kilogramm molds at the Verninsky GOK gold mine and processing plant, operated by Polyus Gold International Ltd., near Bodaybo, Russia.

Gold hit a near three-week high on Friday after much slower-than-expected U.S. economic growth weighed on the dollar, and was on track for a second monthly gain in a row.

The U.S. Commerce Department reported that GDP grew at an annual rate of 1.2 percent in the second quarter, far less than economists' estimates of 2.6 percent growth.

Spot gold, down initially, reached its highest since July 12 at $1,348.60 an ounce after the U.S. data and was up 1.76 percent at $1,352.48.

U.S. gold for December delivery rose 1.36 percent to $1,359.30 an ounce.

"The Fed's decision to lift rates is data dependent and if figures continue to disappoint, like second-quarter GDP growth today, gold will push higher," Commerzbank analyst Carsten Fritsch said.

At its policy meeting this week, the Federal Reserve stopped short of indicating that a further increase in U.S. interest rates is on the cards for later this year.

Uncertainty over the path of interest rates has held gold in check since it rallied to more than two-year highs in the wake of Britain's shock vote last month to leave the European Union.

The dollar index fell 1.15 percent on Friday against a basket of six currencies.

The U.S. currency's decline was also due to the strength of the yen, after the Bank of Japan underwhelmed investors by expanding monetary stimulus through only a modest increase in purchases of exchange-traded funds, to try and spur growth and accelerate inflation towards its 2 percent target.

Spot palladium rose 2.23 percent to $711 an ounce, getting close to Thursday's peak, which was its highest since October 2015. It is up 18 percent this month, and on track to notch up its best monthly performance since February 2008.

Spot platinum climbed 1.73 percent to $1,147 an ounce and was on track for its best month since January 2012, with more than 10 percent growth this month. It hit a 14-month high on Wednesday.

"We are bullish on the PGMs (platinum group metals) fundamentally, but we are unclear as to whether or not fundamental motivations have been driving the current PGM rally," HSBC said in a note.

Spot silver was up 0.71 percent at $20.29 an ounce, and headed for a second monthly gain.