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Gold price ticks down from daily highs as U.S. Q3 GDP disappoints

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(Kitco News) The U.S. economy slowed sharply in the third quarter, the U.S. Bureau of Economic Analysis reported on Thursday.

The advance estimate showed that the U.S. Q3 GDP rose 2% versus the market’s expectations of a 2.7% increase. In the second quarter, the U.S. GDP came in at 6.7%.

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

Gold price edged down from daily highs following the data release, with December Comex gold futures last trading at $1,800.00, up 0.07% on the day.

Real personal consumption slowed in Q3, growing only 1.6% after a strong reading of 12% in Q2. Delta variant, supply chain issues, and price increases contributed to the decline.

On the inflation front, the PCE price index came in at 5.3% compared to the previous advance of 6.5%. Core PCE, which strips out volatile food and energy prices and is the Federal Reserve’s preferred inflation metric, was at 4.5% compared to an increase of 6.1% posted in the prior quarter.

The report highlighted supply chain issues, especially in the auto sector, said CIBC Capital Markets senior economist Katherine Judge.

“The 2.0% annualized pace of growth was below the consensus expectation for a 2.6% pace and included a drop in goods spending, mainly reflecting lower auto purchases due to supply bottlenecks, which partly offset growth in services spending, which decelerated as the Delta variant spread. Residential investment dropped off as labor and material shortages weighed, while business investment rose on intellectual property products, offsetting drops in equipment and structures,” Judge said.

She added that the economy is expected to post stronger growth in the fourth quarter. “Growth in Q4 is set to accelerate as Hurricane Ida impacts reverse, while the deceleration in Covid cases could support activity in service sectors, although supply chain bottlenecks remain a downside risk,” Judge wrote.

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