Make Kitco Your Homepage

Gold price trades near daily highs as U.S. Q2 GDP comes in well below expectations

Kitco News

(Kitco News) The U.S. economy grew less than expected in the second quarter, the U.S. Commerce Department said on Thursday.

The preliminary estimate showed that the U.S. second-quarter GDP rose 6.5% versus markets’ expectations of an advance of 8.5%. The first-quarter data was also revised down to 6.3% from 6.4% growth.

Despite coming in short of expectations, the second-quarter GDP still saw the biggest jump in growth since the third quarter of 2020 when the economy started to come back to life after the initial COVID-19 shock.

“The increase in real GDP in the second quarter reflected increases in personal consumption expenditures (PCE), nonresidential fixed investment, exports, and state and local government spending that were partly offset by decreases in private inventory investment, residential fixed investment, and federal government spending,” the report said.

Gold was largely unchanged and remained near its daily highs, with August Comex gold futures last trading at $1,823.70, up 1.33% on the day.

Personal consumption was boosted by an increase in services, including food and accommodations. There was also an increase in transportation and intellectual property products, led by research and development.

On the inflation front, the PCE price index rose 6.4% compared to the previous advance of 3.8%. Core PCE, which strips out volatile food and energy prices and is the Federal Reserve’s preferred inflation metric, was up 6.1% compared to an increase of 2.7% posted in the prior quarter.

The miss in the quarterly GDP numbers was mainly due to weakness in residential investment, inventories, and government spending, said CIBC Capital Markets senior economist Katherine Judge.

“A more significant drop in residential investment compounded drops in inventories and government spending, explaining the downside miss. However, the headline masked a strong showing from consumers, as consumption rose at an 11.8% annualized pace, reflecting gains in services that reopened as well as spending on goods,” said Judge. “Given that the savings rate is still almost 11%, there remains ample spending power for consumers to drive strong growth ahead.”

Live 24 hours gold chart [Kitco Inc.]

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.