Gold climbs above $1420 despite broad USD strength
- GDP expands more than expected in Q2 in US.
- US Dollar Index extends rally, approaches 98.
- Major central banks announce decision to abolish gold-selling agreement.
Following a drop to a session low of $1413 with the initial reaction to the upbeat GDP data from the US, the XAU/USD pair reversed its direction and was last seen trading near $1423, adding nearly $9, or 0.6%, on a daily basis. With today's upsurge, the pair was able to erase a large portion of this week's losses.
US GDP report lifts DXY on Friday
In its first estimate published today, the US Bureau of Economic Analysis said that the real GDP in the US expanded by 2.1% in the second quarter. Although this reading came in below the first quarter's 3.1% growth, it beat the market expectation of 1.8% and allowed the USD to gather strength with the US Dolar Index advancing to its highest level in nearly two months at 97.98. At the moment, the index is up 0.14% on the day at 97.92.
Despite the upbeat data, the 10-year Treasury bond yield stays in the negative territory, allowing safe-havens to remain resilient against the dollar.
Meanwhile, the European Central Bank today announced the end of the central bank gold-selling pact, which seems to be providing modest support to the precious metal.
"Signatories of the 4th central bank gold agreement no longer see need for formal agreements," the ECB said in an official statement. "When it was introduced, the agreement contributed to balanced conditions in the gold market by providing transparency regarding the intentions of central banks."
Technical levels to watch for