(Kitco News) - The U.S. economy may not be in as bad a shape as initially expected, but the nation’s Gross Domestic Product (GDP) remains in contraction territory, continuing to support gold’s current safe-haven appeal.
The second estimate of U.S. GDP showed the economy contracted by 0.1% in the first quarter of 2025, the Bureau of Economic Analysis announced Thursday. The data was better than expected, as economists had forecast the contraction would remain unchanged at 0.3%.
The report noted that trade imbalances remain the primary driver behind the contraction.
“The decrease in real GDP in the first quarter primarily reflected an increase in imports—which are subtracted in the calculation of GDP—and a decrease in government spending. These movements were partly offset by increases in investment, consumer spending, and exports,” the report said.
Not only is gold holding critical support above $3,300 an ounce, but it also attracted some buying interest in the initial reaction to the first-quarter economic data. Spot gold is currently trading just below session highs, at $3,313.70 an ounce, up 0.83% on the day.
Although economic growth was revised slightly higher from the initial contraction, components of the data do not bode well for a future recovery. Some economists have dismissed the contraction as exaggerated due to the trade numbers, but the data also shows slowing consumption among consumers. Consumption increased 1.2% in the first quarter, down from the 1.8% estimate in the first reading.
The report also shows inflation remains stubbornly elevated; the preliminary GDP Price Index rose 3.7%, unchanged from the initial estimate. Meanwhile, the Personal Consumption Expenditures (PCE) Index rose 3.6%, unchanged from the initial estimate. Core PCE, which strips out volatile food and energy prices, rose 3.5%, up from the first reading of 3.4%.
