The US Commerce Department announced that long-term commodity orders increased by 3.1% in January, far exceeding analysts' forecast of 1.3%, and reversed the 1.8% decrease in December.
The January long-term orders data showed that demand in the US economy is still quite strong. This is often seen as a positive signal for the USD and could put downward pressure on gold prices because gold is an uninterrated asset.
However, orders for core long-term goods - excluding transportation - remained unchanged at 0.0%, down from the forecast increase of 0.4%. Notably, orders for non-defense capital goods (excluding aircraft manufacturing) increased by 0.8%, double the forecast of 0.4% and the increase of 0.2% in the previous month.
This partly reduces expectations that the US economy is recovering evenly, which could make the US Federal Reserve (Fed) more cautious in its interest rate hike roadmap, thereby supporting gold prices.
Notably, data from the National Association of Realtors (NAR) also puts more pressure on gold prices. The index of pending home contracts fell 4.6% in January, down to a record low of 70.6 - much lower than the forecast increase of 1.3%.
Compared to the same period last year, the number of contracts decreased by 5.2%, contrary to the expectation of a 6% increase. Housing affordability in the US weakened as mortgage rates ranged from 6.91% to 7.04% in January.
In another development, the US Bureau of Economic Analysis (BEA) released its second report on US GDP in the fourth quarter of 2024, showing economic growth unchanged at 2.3%, in line with forecasts. However, inflationary pressures continued to increase with the GDP price index increasing by 2.4%, higher than the initial estimate of 2.2%. The core PCE index - the Fed's preferred inflation measure - rose 2.7%, exceeding the forecast of 2.5%. Despite rising inflation, consumer spending remained steady with a 4.2% increase in the fourth quarter.
The US GDP report for the fourth quarter of 2024 remains unchanged, showing that the US economy maintains a stable momentum. This is a neutral factor for gold, as it does not change expectations for economic prospects.
However, it is worth noting that inflationary pressures continue to increase. The GDP price index increased by 2.4%, higher than the initial estimate of 2.2%, and the core PCE index - the Fed's preferred inflation measure - increased by 2.7%, exceeding the forecast of 2.5%. Higher-than-expected inflation typically motivates the Fed to maintain a tighter monetary policy for longer, increasing the likelihood of holding high interest rates for the long term. This often puts downward pressure on gold prices, due to increased opportunity costs when holding gold.
