Gold Retreats As U.S. Q2 GDP Growth Revised Up To 3%
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(Kitco News) - Gold prices fell following the release of better-than-expected second quarter GDP data.
Gross domestic product increased at a 3% annual rate in the April-June period, the quickest pace in more than two years, the U.S. Commerce Department said in its second release. The Q2 pace nearly tripled the 1.2% growth rate reported in Q1.
The release beat economists' expectations, which called for an upward revision from 2.6% reported last month to 2.7%.
Immediately after the GDP number was published gold prices fell, with December Comex gold last trading at $1,311.50, down 0.56% on the day. Gold prices began Wednesday's session by trading moderately lower amid some profit taking. Investors’ risk appetite quickly rebounded following Tuesday’s North Korea missile launch.
One of the main drivers for such robust GDP data was strong consumer spending, which was up 3.3% in Q2, marking the quickest rate in a year. Business fixed investment also looked healthier.
“With this second estimate for the second quarter, the general picture of economic growth remains the same; increases in personal consumption expenditures (PCE) and in nonresidential fixed investment were larger than previously estimated. These increases were partly offset by a larger decrease in state and local government spending,” the report said.
Improved GDP growth for Q2 could be a good boost to the U.S. dollar, said Royce Mendes, economist at CIBC Capital Markets.
“On second look, the US economy grew even faster than the original second quarter estimate had suggested. Household spending and business fixed investment both looked healthier, with structures, equipment and intellectual property all supporting the higher reading in capital formation. The release has been somewhat positive for the US dollar and negative for fixed income,” Mendes said.