Gold Rebounds Amid Positive Economic Reports

Implications for Gold

What does all this mean for the price of the yellow metal? Well, the recent jump in the price of gold is encouraging. What is important here is that this rebound occurred amid the flood of positive economic data. For instance, the initial jobless claims have decreased to 576,000, a lower level than expected and the lowest since the pandemic started, as the chart below shows.

US

Additionally, retail sales surged 9.8% in March, following a 2.7% decline in February, while the Fed’s Beige Book reported that “national economic activity accelerated to a moderate pace from late February to early April”. Additionally, both the Philadelphia Fed manufacturing index and the Empire State manufacturing index surprised us on the positive side.

The fact that gold held its gains and continued the rebound even after the publication of several positive economic reports is bullish. Of course, it might be simply the case that the reduction in the real interest rates simply outweighed other indicators, but it’s also possible that gold’s bears got tired.

Indeed, the sentiment was so negative in the gold market that it couldn’t get much worse than it already was. Gold shined brightly during the Great Lockdown and economic crisis. But now, when the economy is recovering, gold has become persona non grata. However, this might imply that we are either close to or we have already reached the bottom. Only time will tell, of course, but the macroeconomic outlook seems to be rather friendly for the price of gold, especially if the real interest rates stop rising or even start declining again.

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