Gold rallies in the aftermath of a dismal US GDP yield slump as WTI fails in its attempt to push beyond $100 and reverses lower

In an effort to follow the rise in global equity markets, front-month WTI futures prices tried to push back above $100 per barrel on Thursday. However, they have since reversed down into the $96.00s, where they are currently trading in the negative for the day. After statistics revealed that the US economy unexpectedly declined for a second consecutive quarter in Q2, proving the country is in a technical recession, traders of the American benchmark for sweet light crude oil appeared to turn their focus back to a deteriorating demand picture.

Copper prices were unable to maintain their previous session highs over $3.50, but they did continue to move favorably upward in the later portion of the US trading day around the $3.48 region as prices rose in international equities markets. On Thursday, traders speculated that new indications of US economic weakness would persuade the Fed to proceed cautiously with rate rises in the upcoming quarters, lowering the medium-term negative risk of higher interest rates. Stocks rose and bond yields decreased in the US and Europe.

You should only trade derivatives with funds you can afford to lose because doing so entails a significant level of risk to your investment. Trading derivatives may not be appropriate for all investors, so make sure you are fully aware of the risks and, if required, seek independent advice. Before engaging in a transaction with us, you should carefully review the Product Disclosure Statement (PDS), which is available on this website or upon request from our offices. Spreads starting at 0.0 pips are available with commission fees of USD $3.50 for every 100k transacted in raw spread accounts. Standard accounts provide spreads starting at 1 pip with no added commission fees. CFD index spreads begin at 0.4 points. Residents of any nation or jurisdiction where such distribution or usage would be in violation of local law or regulation are not the intended audience for the material on this website.

Currently trading at close to three-week highs, copper is up more than 4.5 percent for the week on expectations of further stimulus in China to help infrastructure projects and the country's struggling real estate market. According to a Thursday Financial Times article, China would lend $148.2 billion to struggling real estate developers. According to rumors from earlier in the week, China would establish a more than $44 billion infrastructure fund. The world's top user of copper is China.

The unfavorable Q2 US GDP growth data on Thursday provided further gasoline for the recent rally in US bond markets, which has pushed rates higher. As a result, rate-sensitive precious metals markets have seen further gains. Spot gold prices increased by another 1.0 percent on Thursday, pushing their advances since their $1,680 lows last week to over 4.0 percent.

Following the latest dovish Fed meeting and Thursday's weak statistics, US 10-year TIPS rates (the US 10-year real yield) are currently down roughly 50 bps from earlier monthly highs. The so-called opportunity cost of storing non-yielding precious metals is decreased by lower actual returns. On the theory that a less hawkish Fed would lead to a better economy in the long run, break-even inflation forecasts have also risen dramatically in recent days. This may be increasing demand for precious metals as an inflation hedge.