On Thursday and Friday this week, two important U.S. government economic reports will be published, which the Federal Reserve will rely on when making the final decision on interest rates at next week's FOMC meeting. Starting on Thursday, the Bureau of Economic Analysis (BEA) will release a report on gross domestic product for the first quarter. According to current forecasts, the GDP for the first quarter of 2023 will be 1.8%. If the forecast is confirmed, it means that the economy continues to shrink from the 2.6% GDP reported in the fourth quarter of last year.
According to a report from Saxo.com, a preliminary survey of economists conducted by Bloomberg predicts that the U.S. real GDP growth in annual terms for the first quarter will decrease to 2%. However, personal consumption expenditure is expected to increase by 4%, which will be the key driving force for maintaining GDP growth. On Friday, the preferred inflation and wage growth indicator used by the Federal Reserve System, PCE, will be released. Economists surveyed by Bloomberg forecast a moderate estimate for the core PCE, which will show an inflation increase of 0.3% MoM and 4.5% YoY.
According to the same Saxo.com report, components related to rent have a lower weight in the core PCE indicators than in the calculation of the core CPI. Thus, the base PCE may not benefit as much as the CPI counterpart from the recent decline in rental fees. Forecasts of these upcoming reports prompted investors to devalue the U.S. dollar.
This, in turn, strengthened gold prices.