(Kitco News) - The gold market is unable to find any significant bullish traction even as the U.S. economy saw a disappointing start to the year.
Thursday, the Bureau of Economic Analysis said the advanced reading of Q1 GDP showed that the economy grew 1.6% in the first three months of the new year, down from 3.4% reported in the fourth quarter.
The data significantly missed expectations as economists were looking for growth of 2.5%.
The gold market is seeing little reaction to the disappointing data. June gold futures last traded at $2,338.10 an ounce, roughly unchanged on the day. The gold market continues to consolidate after falling from its recent record highs above $2,400 an ounce.
According to some analysts, gold investors could be focused on hotter-than-expected inflation data. The report said that the Price Index for the first quarter increased 3.1%, up from 1.9% reported in the fourth quarter.
At the same time the Personal Consumption Expenditures increased 3.4%, compared with 1.8% seen in the last quarter. Excluding food and energy prices, core PCE increased 3.7%, compared to 2.0% reported in the fourth quarter.
“Inventories may help to explain some of the delta as the March wholesale inventory data released alongside this report fell 0.4%. Ultimately though, you take it at face value at 1.6% annualized growth isn't the kind of thing that's going to spur demand-driven inflation,” said Adam Button, head of currency strategy at Forexlive.com, in a note. “With that, I think the market is too focused on tomorrow's PCE report here and no focused enough on a slowing economy and what it will mean for PCE report in the months beyond.”
Paul Ashworth, Chief North American Economist at Capital Economics, said in a note that although GPD showed the weakest growth in nearly two years, there is still underlying momentum in the economy.
“The strong 6.1% gain in final sales to private domestic purchasers illustrates that there is still a lot of positive underlying momentum,” he said. “Consumption growth was a solid 2.5%, although the slowdown in real personal disposable income growth to only 1.1% suggests it may slow further, particularly with the saving rate down to only 3.6%.”
However, Ashworth said that investors could end up paying more attention to the latest inflation data.
Neils Christensen
Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press. Neils can be contacted at: 1 866 925 4826 ext. 1526 nchristensen at kitco.com @Neils_c