A country’s Gross Domestic Product (GDP) measures the rate of growth of an economy over a given period, usually a quarter. The most reliable data are those that compare GDP with the previous quarter, e.g. the second quarter of 2023 versus the first quarter of 2023, or with the same period of the previous year, e.g. the second quarter of 2023 versus the second quarter of 2022. Annualized quarterly GDP data extrapolate the growth rate for a given quarter as if it were constant for the rest of the year. However, they can be misleading if ephemeral shocks affect growth in one quarter but are unlikely to last throughout the year – as was the case in the first quarter of 2020 at the outbreak of the Covid pandemic, when growth fell sharply.

A higher GDP score is generally positive for a country’s currency because it reflects a growing economy that is more likely to produce exportable goods and services and also attracts greater foreign investment. For the same reason, a decline in GDP is usually negative for the currency. When the economy grows, people spend more, which leads to inflation. The country’s central bank must then raise interest rates to combat inflation, which has the side effect of attracting more capital inflows from global investors, thus helping the local currency to appreciate.

When the economy grows and GDP increases, people spend more, which leads to inflation. The country’s central bank must then raise interest rates to combat inflation. Higher interest rates are bad for gold because they boost the opportunity cost of holding gold compared to putting your money in a deposit account. Therefore, higher GDP growth is usually a bearish factor for the gold price.