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(Kitco News) - Recession fears continue to wane, keeping gold prices near session lows as the U.S. economy grew more than expected during the second quarter.
The third estimate showed that the U.S. Q1 GDP rose 2.0% versus markets' expectations of a 1.4% increase. Economic activity showed robust growth compared to the previous reading of 1.3%.
"The updated estimates primarily reflected upward revisions to exports and consumer spending that were partly offset by downward revisions to nonresidential fixed investment and federal government spending," the report said.
On the inflation front, the PCE price index was relatively unchanged, rising 4.1%, compared to the previous estimate of 4.2%.
Core PCE, which strips out volatile food and energy prices, was a tick lower than expected, rising 4.9%, compared to consensus forecasts of 5.0%.
Ahead of the latest GDP report, the gold market was already struggling to hold support as prices continued to trade at a three-month low. The initial reaction shows gold remains weighed down by the positive data. August gold futures last traded at $1,908 an ounce, down 0.74% on the day.
Consumer demand continues to drive U.S. growth. The report said that consumer spending on durable goods increased 16.3%, up from a 1.3% decline in the fourth quarter of 2022. Overall, consumer spending rose 4.2%, up from the previous estimate of 3.8%.
"So much for the recession," said Adam Button, chief currency strategist at Forexlive.com. "It's a bit of a shock that economists missed this one so badly."
The latest economic data does not bode well for gold, as analysts note that the positive data will tarnish gold's safe-haven allure. At the same time, economists have pointed out that the robust economic growth means the Federal Reserve has plenty of room to tighten interest rates to bring inflation down to its 2% target.
