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Gold Prices Down But Not Out Following 4.1% U.S. Q2 GDP Growth

Kitco News

(Kitco News) - While the gold market is on the defensive Friday, it is not seeing fresh selling following robust U.S. economic growth data for the second quarter.

Friday, the advance reading of second-quarter Gross Domestic Product showed the U.S. economy grew 4.1%. The data was slightly weaker than expected as consensus forecasts were calling for growth of 4.2%.

Despite the slight miss, the U.S. economy grew at its fastest pace since 2014. The surge in economic activity came after 2.2% growth in the first quarter.

Gold has been struggling to find momentum and has been unable to push past critical initial resistance. Gold was in negative territory ahead of the data and is little changed in initial reaction to the GDP numbers. August gold futures last traded at $1,220.6 an ounce, down 0.40% on the day.

Looking at some of the components, personal consumption increased 4% in the second quarter, beating estimates for 3% growth. Consumer spending grew significantly from 0.9% seen in the first quarter.

Exports increased 9.3% in the second quarter; meanwhile, imports increased 0.5%.

Business investment increased 7.3% between April and June.

Inflation is a mixed picture for gold. The GDP price index increased to 3% in the second quarter, coming in well above expectations for a 2.3% rise. However, the Personal Consumption Expenditures (PCE) Index increased 1.8% in the second quarter, down from 2.5% in the first quarter.

Core PCE, which strips out volatile food and energy prices increased 2.0%, down from 2.2% seen in the first quarter.

While many are see robust growth in the second quarter, some economists are warning that the data is backward looking.

“Growth flowered in the spring, but there were plenty of reasons to think that the US economy can't sustain anywhere near that pace head,” said Avery Shenfeld, senior economist at CIBC World Markets. “Overall, these are definitely big numbers, but not unexpectedly so, and should not alter views on the Fed or the second half outlook much.”

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