Gold Climbs as Weakening US Economy Signals Slower Rate Hikes

7.28.22 - Recession Looms as U.S. GDP Falls in 2nd Quarter

Gold last traded at $1,753 an ounce. Silver at $19.95 an ounce.

NEWS SUMMARY: Precious metal prices rebounded Thursday on bargain hunting and a flat dollar. U.S. stocks rose as investors bet the economic downturn would soon cause the Federal Reserve to end its aggressive hiking campaign.

Yahoo Finance--"Gold climbed after the US economy shrank for a second consecutive quarter, pushing the dollar and Treasury yields lower, and clouding the outlook for further aggressive interest-rate hikes as the Federal Reserve fights inflation.

Bullion rallied as much as 1.2% to a three-week high after a report showed US gross domestic product fell 0.9% in the second quarter as inflation weighed on consumer spending. The Fed raised rates by 75 basis points Wednesday, and Chairman Jerome Powell said while a similar move was possible again, the pace of hikes will slow at some point.

'Wall Street is convinced that the Fed will likely pivot to a slower pace of tightening in September,' Ed Moya, senior market analyst at Oanda Corp., said in a message. 'The unexpected contraction of the US economy means that both the peak in Treasury yields has been made and a bottom has been formed for gold. The stagflation playbook is bullish for gold prices and that appears how many traders will be positioning themselves going forward.'....

The Federal Open Market Committee 'is strongly committed to returning inflation to its 2% objective,' it said in a statement, repeating language that it's 'highly attentive to inflation risks.' Powell said officials would set policy on a meeting-by-meeting basis rather than offer explicit guidance on the size of the next move."