Gold retreated slightly on Thursday after revised data on the GDP of the U.S. for Q2 revealed the economy was more solid than had initially been reported. The report published shows that U.S. GDP exhibited 3.8% growth year-on-year for Q2 of this year, which was higher than the 3.5% that analysts had expected.
This GDP data supports those members of the Fed who are hawkish and would prefer to see interest rates maintained at an elevated level for longer. When interest rates are high, demand for gold dips since it is non-yielding and investors opt for other asset classes that offer a return on their investment. Additionally, data on inflation also revealed elevated numbers, which doesn’t make a strong case for more solid interest rate reductions during the next meetings of the FOMC.
Gold dipped slightly to $3765 per once and has since held steady in that range. This could partly be explained by the risk aversion among investors due to a number of concerns, such as a possible shutdown of the U.S. government. This concern has held back investors from increasing their positions in riskier assets like stocks, and that has helped gold to hold fort since fewer investors are cashing out as would have happened if the cloud hanging over the federal government hadn’t been present.
Additionally, the war between Russia and Ukraine has recorded a notable escalation, and this situation creates concerns about geopolitics. Geopolitical tensions push investors away from riskier assets and they take shelter in safe haven assets, such as bullion. The Russia-Ukraine situation has therefore helped to stop the bleed in the gold market in the wake of the solid economic data coming out of the U.S.
It is also noteworthy that the Trump administration has instructed federal agencies to get ready to fire employees en-masse should a shutdown materialize. The budget office at the White House informed agencies to identify areas where discretionary funds are allocated and fire employees in those programs. Critics in Congress, such as Chuck Schumer, say such an unprecedented move is intended to intimidate lawmakers into agreeing with the president’s spending plans, and that such firings are bound to be reversed if challenged in court or the employees who are let go are inevitably going to get rehired once funding issues are resolved.
The rhetoric about mass firings raises concerns among investors, and this is acting as a tailwind for safe haven gold. Companies like GEMXX Corp. (OTC: GEMZ) that are involved in extracting gold and making consumer goods like jewelry from this gold will be monitoring the developing situation on Capitol Hill closely.
NOTE TO INVESTORS: The latest news and updates relating to GEMXX Corp. (OTC: GEMZ) are available in the company’s newsroom at https://ibn.fm/GEMZ
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