The gold ( XAU/USD ) price plunged by more than 1.3% on Thursday as the US Dollar Index (DXY) moved sharply higher after a strong US macro data release.
The Commerce Department's second estimate of Q4 Gross Domestic Product ( GDP ) reiterated that the economy grew at a very healthy 2.3% annualised rate in the last three months of 2024. This confirmation solidified the perception of a robust closing of the year, signaling sustained economic growth despite prevailing uncertainties.
Consumer spending, which accounts for about 70% of GDP, surged impressively at 4.2% and demonstrated a resilient appetite for goods and services among households. This robust consumer activity underpinned the overall growth, suggesting a confident consumer base willing to spend. New orders for durable goods also grew by a substantial 3.1%, significantly surpassing the anticipated 2%. This unexpected surge signaled strong business investment and consumer confidence in future economic conditions.
At the same time, initial jobless claims came out higher than expected, potentially hinting at some emerging softness in the labor market. However, the market pretty much ignored the figures, focusing on the more positive aspects of the GDP and Durable Goods reports.
"We don't think the report signals significant labour market deterioration", says Oren Klachkin, an economist at Nationwide.
He offered a reassuring perspective that the increase in jobless claims was likely an anomaly rather than a harbinger of a broader trend. Overall, the market viewed yesterday's report as very bullish for the greenback, with DXY surging above the 107.000 level, putting downward pressure on XAU/USD.
XAU/USD was falling during the Asian and early European trading sessions. Investors now focus on the US Personal Consumption Expenditures (PCE) Price Index due at 1:30 p.m. UTC today. The market expects PCE to remain at 0.3%.
"'Any significant deviation from the estimated PCE data could trigger a negative reaction, based on concerns that the Fed (Federal Reserve) is less likely to lower interest rates", said Bart Melek, head of commodity strategies at TD Securities.
"Spot gold may break support at $2,867 per ounce and fall towards $2,835 to $2,847 range", said Reuters analyst Wang Tao.
The euro ( EUR/USD ) lost 0.82% against the US dollar (USD) on Thursday as the US Dollar Index (DXY) rose significantly after the release of positive US macroeconomic data.
US Commerce Department revealed that Gross Domestic Product (GDP) increased at a healthy 2.3% annualised rate last quarter after accelerating at a 3.1% pace in Q3. Additionally, the greenback strengthened after US President Donald Trump said that 25% tariffs on Mexican and Canadian goods would go into effect on 4 March because drugs were still pouring into the US from those countries.
"It's a world where people don't know what's going on, so they will wait for clarity before they commit to bigger investments, and that leaves foreign exchange a little bit sidelined and a little bit more prone to these kinds of quick catch-ups. Tariffs will confuse people about what it means for the economics of the world, who's going to get hurt the most, and who wins and who loses, and there's going to be a lot of noise and dust to figure out before anyone comes through all of that", said Bob Savage, head markets strategist at BNY in New York.
Under these circumstances, the reaction of most investors is to flock into the safety of the US dollar. Thus, EUR/USD is experiencing downward pressure as escalating concerns over potential new trade tariffs targeting the eurozone heighten market anxiety.
EUR/USD was falling during the Asian and early European trading sessions. Today, the main focus is on the German Consumer Price Index (CPI) , at around 12:00 p.m. UTC, and on the US Personal Consumption Expenditures ( PCE ) Price Index due at 1:30 p.m. UTC. If EUR/USD drops below 1.03486, a much bigger decline may follow, possibly towards the parity level. Only a rise above 1.04550 will invalidate the underlying short-term bearish trend.
Bitcoin (BTC) was relatively unchanged yesterday but plunged by more than 5% during the Asian session earlier today as investors flocked into the safety of the US dollar. The risk-off mood prevailed due to escalating fears surrounding newly imposed or threatened trade tariffs, which amplified anxieties about global economic stability.
Bitcoin's fall below $80,000 shows that positive sentiments from a crypto-friendly administration and high-profile endorsements have run their course. It's clear bitcoin is a risk asset, not the inflation hedge or digital gold it's often touted to be', said Joshua Chu, co-chair of the Hong Kong Web3 Association. On Thursday, Trump said his proposed tariffs of 25% on Mexican and Canadian goods would take effect on 4 March, along with an extra 10% duty on Chinese imports, defying expectations of those who hoped for a further delay in the levies. The threat of new tariffs creates an environment of uncertainty, so investors flee from risky assets.
Overall, BTC/USD has fallen by 21% from its 20 January peak and is back to levels seen shortly after Trump's US presidential election victory in November. Hopes for a strategic Bitcoin reserve have faded, while tariff threats weigh on demand for speculative assets. According to Reuters, some analysts said the market will likely remain subdued while waiting for a bullish signal, such as indications that the US Federal Reserve (Fed) plans to cut interest rates or a clear pro-crypto regulatory framework from the Trump administration.
Today, traders should focus on the US Personal Consumption Expenditures (PCE) Price Index due at 1:30 p.m. UTC. Lower-than-expected figures might increase the chances for a Fed rate cut and provide at least a temporary boost to BTC/USD. Conversely, higher-than-expected numbers may extend the bearish trend further, potentially pushing Bitcoin towards $77,300.