Gold Prices Ignore Weaker Than Expected GDP In Q1
(Kitco News) - Gold prices are seeing a very limited reaction to disappointing U.S. gross domestic product data that showed weaker than expected growth in Q1, according to the U.S. Commerce Department.
The final estimate of the first-quarter gross domestic product showed the U.S. economy growing at an annual rate of 2% versus the expected 2.2%. This is the third GDP reading. The very first estimate projected Q1 growth to be at 2.3%.
Despite weaker growth, gold prices continued to struggle, with August Comex gold futures last trading at $1,253.60, down 0.20% on the day. Overnight, August gold briefly touched a 12-month low of $1,249.60.
“The deceleration in real GDP growth in the first quarter reflected decelerations in PCE, exports, state and local government spending, and federal government spending and a downturn in residential fixed investment,” the report said.
Inflation was also slightly weaker than expected with the Personal Consumption Expenditures Index increasing 2.5%, down from the second estimate of 2.6%. Core PCE, which strips out volatile food and energy prices and is the Fed’s preferred inflation measure, increased 2.3%, meeting market expectations.
The report also noted that consumer spending, which represents more than two-thirds of U.S. economic activity, was revised down for Q1 as well, increasing 0.9% in comparison to the previous estimate of 1%, marking the slowest pace in nearly five years.
Gold was unable to use the momentum to break higher, continuing to trade under pressure due to higher U.S. dollar, which has been rallying in light of rising trade war tensions. But, some analysts see gold as oversold and due for a correction any moment.
“Both markets are now technically oversold on a short-term basis and due for decent rebounds very soon. Also, the big rally in crude oil prices recently suggests the raw commodity sector has bottomed out and will see better days just ahead,” Kitco’s senior technical analyst Jim Wyckoff said. “Many raw commodity prices at present are being viewed as value-buying opportunities, on a longer-term basis, including the precious metals.”