Analysts and investors are waiting for two critical government reports due out on Wednesday and Thursday of this week. On Wednesday the Bureau of Economic Analysis (BEA) will release its latest numbers on real GDP which will be followed on Thursday by the PCE for May 2022.Concerns over a potential recession which will either be confirmed or negated by Wednesday's GDP report. These concerns took both the dollar and gold lower today.
According to a report by Dr. David Kelly, Chief Global Strategist at J.P. Morgan asset management, "1Q22 Real GDP showed the economy contracted at a 1.5% annual rate in 1Q22, a deceleration from the boomy 4Q21."
The weakness was primarily due to volatile inventory and trade data. Trade subtracted 3.2% from overall GDP growth as exports fell sharply and imports soared.The report also said that first-quarter 2022 earnings have held up better than expected. However, inflation continues to far exceed the FOMC's 2% target with the May CPI report indicating hotter than expected inflation despite hopes by the Federal Reserve that it would moderate.David Kelly concluded that the Federal Reserve could push the economy into a recession if it over-tightens in response to supply-driven inflation. He also said that heightened geopolitical tensions with Russia could result in continued energy shortages, low consumer confidence, and dampening growth. Markets may remain depressed and volatile until investors receive clarity on inflation and the Fed, Kelly added.The other key report to be released on Thursday is the PCE price index for May. The PCE for April revealed a slight uptick in core inflation increasing by 0.2% month over month. However. This was a decrease from the increase in March which came in at a 0.9% increase in MoM.Although we will have to wait until Thursday for the official PCE price index from the BEA, last week they reported that the US current-account deficit widened by $66.6 billion, or 29.6 percent, to $291.4 billion in the first quarter of 2022, according to statistics released today by the US Bureau of Economic Analysis. The revised fourth-quarter deficit was $224.8 billion. The first-quarter deficit was 4.8% of current-dollar gross domestic product, up from 3.7% in the fourth quarter.Gold opened at $1822.10 today.
The nearest resistance level is at 1849.45, which is the highest gold price reached in trading last week. However, the major resistance is at $1,880.26, which corresponds to the highest gold price reached this month on June 13.
Strong support for gold does not occur until $1805 with major support at $1786.20. Both levels of support are based upon recent price lows.
