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Gold price hits new daily lows as U.S. Q4 GDP beats expectations

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(Kitco News) - The U.S. economy grew more than expected in the fourth quarter, the U.S. Bureau of Economic Analysis reported on Thursday.

The preliminary estimate showed that the U.S. Q4 GDP rose 6.9% versus markets' expectations of a 5.5% increase. In the third quarter, the U.S. GDP came in at 2.3%.

"The acceleration in real GDP in the fourth quarter primarily reflected an upturn in exports, accelerations in private inventory investment and PCE, and smaller decreases in residential fixed investment and federal government spending that were partly offset by a downturn in state and local government spending. Imports accelerated," the report said.

On the inflation front, the PCE price index came in at 6.5% compared to the previous advance of 5.3%. Core PCE, which strips out volatile food and energy prices and is the Federal Reserve's preferred inflation metric, was at 4.9% compared to an increase of 4.6% posted in the prior quarter.

Personal consumption moved up in Q4, growing 3.3% after a slower reading of 2% in Q3.  

Gold price dropped to new daily lows following the data release, with February Comex gold futures last trading at $1,803.80, down 1.42% on the day.

Live 24 hours gold chart [Kitco Inc.]

Despite a very strong report in Q4, economists are cautious going into 2022, stating that the Omicron wave will negatively impact growth in the first quarter.

"The acceleration in GDP growth to 6.9% annualized in the fourth quarter, from 2.3% in the third, mainly reflects a massive surge in inventories, which will be at least partly reversed in the first quarter of this year. The Omicron wave means the economy is starting 2022 on a much weaker footing and we expect growth to disappoint over the rest of this year too," said Capital Economics senior U.S. economist Andrew Hunter.

Gold price tumbles $35 as Fed's Powell says inflation 'is slightly worse' than in December, signals March rate hike

The International Monetary Fund (IMF) this week cut the U.S. GDP forecast for this year to 4%, which is 1.2 percentage points lower than previously thought. The IMF highlighted the Federal Reserve's aggressive monetary policy tightening, supply chain disruptions, and Build Back Better fiscal package removal.

"Among changes to advanced economy forecasts for 2022, a revised assumption removing the Build Back Better fiscal policy package from the baseline, earlier withdrawal of monetary accommodation, and continued supply chain disruptions have contributed to a downgrade of 1.2 percentage points for the United States," the report said.

Fed Chair Jerome Powell on Wednesday said that the Omicron variant will "surely weigh on economic growth this quarter" but its impact will likely be temporary if the wave passes quickly.

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