Gold Prices Benefits From Weak Economic Data As GDP Shows 2.2% Growth In Q1
(Kitco News) - The gold market has pushed slightly above $1,300 an ounce as U.S. economic data continues to disappoint, with U.S. gross domestic product showing slightly weaker growth than expected, according to the U.S. Commerce Department.
Wednesday the preliminary reading of first-quarter Gross Domestic Product showed the U.S. economy grew 2.2% in the first quarter. The data was weaker than expected as consensus forecasts were calling for growth of 2.3%. This is the second GDP reading. The initial report pegged growth at 2.3%.
Gold prices, hovering around $1,300 an ounce ahead of the report, has pushed modestly higher. June gold futures last traded at $1,301 an ounce, up 0.16% on the day. The GDP data comes on the heels of weaker than expected private sector employment data.
Along with the weaker than expected headline data, the report noted that consumer spending was slightly weaker than expected, increasing 1.0% in the first quarter, down from the initial estimate of 1.1%.
Inflation was also slightly weaker than expected with the Personal Consumption Expenditures Index increasing 2.6%, down from the initial estimate of 2.7%. Core PCE, which strips out volatile food and energy prices and is the Fed’s preferred inflation metrics, increased 2.3%, down from the initial estimate of 2.5%.
Economists have shrugged off the latest disappointing economic numbers with most saying that there are expectations that the first quarter traditionally shows weak growth with activity picking up later in the year.
Andrew Grantham, senior economist at CIBC World Markets, said that recent retail sales numbers have picked up and that bodes well for economic growth in the second quarter.
“With retail sales figures suggesting that the sluggish pace of consumer spending is turning around, and with more room now for inventories to add to Q2 growth, we expect GDP to accelerate to above 3% in the second quarter,” he said.