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Gold Higher But Gains Seems Limited

Gold is trading higher against US Dollar after the Bureau of Economic Analysis reported that Real Gross Domestic Product increased at an annual rate of .1% in the first quarter missing the economist’s estimate of 1.2% increase. However the bureau also emphasized that the first quarter advance estimate released is based on source data that are incomplete or subject to further revision. Consumer spending which is considered as the main driver of the U.S. economy actually rose 3% after a strong 3.3% gain in 4th quarter but the main increase was driven mostly by higher outlays in utilities and health care. Business Investment on equipment fell 5.5% which is biggest drop in almost five years. The data perfectly shows the impact of adverse weather conditions on the economy.

Looking at the 4 hour chart, Gold seems like trading within a downward sloping channel. Gold was trading lower ahead of the data and found support from the support trend line of the channel. It then rose towards the resistance trend line after the release of the data. The gain seems limited as the pair should find resistance from the resistance trend line.There is a key resistance at 1297.95. In my opinion, Gold will continue to trade within this channel and will wait for the FOMC statement coming out at 2:00 PM EDT.