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Gold prices edged lower in European trade on Monday, as investors looked to buy into rising equity markets rather than purchasing safe-haven assets, but prices held near three-week highs amid waning expectations that the Federal Reserve will raise interest rates anytime soon.
The advance read on second quarter GDP showed a 1.2% annualized growth rate, well below expectations for 2.6%, the Commerce Department said on Friday. First quarter GDP was revised lower to 0.8% from 1.1%.
The disappointing data lessened the threat of an early interest rate rise from the Federal Reserve. Fed funds futures are currently pricing in just a 12% chance of a rate hike by September. December odds were at 33%, down from 43% ahead of the GDP report and compared to 53% at the start of last week.
Top U.S. Fed policymakers held varying opinions about rate hikes, with the Dallas Fed President Robert Kaplan calling for caution, while the San Francisco Fed President John Williams expecting the central bank to raise interest rates up to two times before year end.
"The (gold) markets will be more prudent ahead of the non-farm payrolls data due on Friday," said Jiang Shu, chief analyst at Shandong Gold Group. "If it is going to be weak, then people will change their expectations about the U.S. economic prospects drastically. If they are relatively good, bad GDP data could be counterbalanced by a good jobs data."
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