Gold Price Affected By Recent Weak GDP Report

On Friday, the preliminary GDP report for the second quarter of 2016 was released.

What does it mean for the gold market?

Big Miss On Q2 GDP

According to the BEA’s advance estimate, the real gross domestic product increased at an annual rate of 1.2 percent in the second quarter of 2016. The reported growth was significantly below the expected 2.6 percent. The disappointing headline buried hope for an economic rebound after a weak first quarter and sent gold prices up. The price of gold increased from less than $1,335 ahead of the release to about $1350 at the end of Friday’s trading in New York.

US Economic Growth Slows

The weak growth in the second quarter of 2016 came after a downwardly revised 0.8 percent (from 1.1 percent) pace in the first quarter. Moreover, the GDP growth estimate for the fourth quarter of 2015 was cut from 1.4 to 0.9 percent. It means that the US economy departed from its assumed 2-percent growth trend. Indeed, as one can see in the chart below, American economic growth remained tepid, despite the small increase in the pace of growth in the second quarter. The harsh reality is that the US economy developed at pace of just around 1 percent in the last three quarters, which clearly signals a loss of momentum.

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