Gold price remains in neutral following 2.1% rise in U.S. Q3 GDP
(Kitco News) - Gold prices are holding steady above a critical support level as the U.S. economy grew less than expected in the third quarter.
Wednesday, the U.S. Commerce Department said that the U.S. economy grew 2.1% between July and September, up only slightly from previous estimates. The data was somewhat weaker than expected as economists were looking GDP growth of 2.2%.
The report noted that the ongoing pandemic continues to impact activity across the country as government subsidies started to wind down.
"The increase in third-quarter GDP reflected the continued economic impact of the COVID-19 pandemic. A resurgence of COVID-19 cases resulted in new restrictions and delays in the reopening of establishments in some parts of the country. Government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased," the report said.
"The increase in real GDP in the third quarter reflected increases in private inventory investment, 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," the report also noted.
Gold prices are holding in neutral territory following the latest GDP report. December gold futures last traded at $1,785 an ounce, up 0.10% on the day. After two sessions of strong selling pressure, analysts have said that they are watching to see if support at $1,781 will hold.
Some analysts have said that gold prices remain well supported as core inflation pressure in the third quarter remains elevated, rising 4.5%, unchanged from the previous reading.
Looking at some of the components of the report, personal consumption rose 1.7%, up slightly from 1.6% in the initial estimate. However, some analysts have said that weak demand for services due to the pandemic was a drag on growth.
However, some economists note that economic growth and consumption should pick up in the fourth quarter as consumers are sitting on a pile of cash.
"The household saving rate is now estimated to have been 9.6% in the third quarter, compared to a previous estimate of 8.9%, so there now appears to be a bit more scope for households to increase consumption by running down their saving," said Michael Pearce, senior U.S. economist at Capital Economics.