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(Kitco News) – Gold prices remain under pressure and close to lows, even as the U.S. economy grew less than expected in the first quarter, according to the latest data from the U.S. Department of Commerce.
The latest economic report said that its first reading of the Gross Domestic Product showed an increase of 4% in the fourth quarter, which did not meet expectations. Economists had expected economic growth of around 4.2%. The third quarter saw GDP grow by more than 33%.
The gold market is not seeing much reaction to the latest economic data. April gold futures traded for the last time at $ 1,841.70 an ounce, down 0.39% on the day.
Although the data was weaker than expected, it came as no big surprise to many economists, as the U.S. economy continues to grapple with the devastating effects of the COVID-19 pandemic.
“The more modest 4.0% annualized gain in fourth quarter GDP was mainly due to some temporary weakness in consumption, which was dragged on by a combination of the withdrawal of fiscal support and the resurgence of coronavirus infections,” said Paul Ashworth, US chief economist at Capital Economics.
On Wednesday, the Federal Reserve noted slower economic growth in its monetary policy statement, released after leaving interest rates unchanged in the zero-limit range.
“The pace of recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most affected by the pandemic,” the statement said.
Katherine Judge, senior economist at CIBC, noted that the 4% impression of US GDP still leaves economic activity 2.5% below pre-pandemic levels.
“We continue to expect a deterioration in activity at the beginning of the first quarter based on the lower mobility requirements to contain the spread of the virus,” she said.
Looking at some of the report’s components, personal consumption was slightly weaker than expected in the fourth quarter, increasing 2.5%. Economists had expected an increase of about 3.1%.
The report also showed that trade was an obstacle to growth. In the fourth quarter, exports increased by 22.0%; meanwhile, imports increased by 29.5%.
Although the US economy ended the fourth quarter a little weaker than expected, Ashworth said he is still optimistic about the acceleration of growth later this year.
“With effective vaccines offering the possibility of a return to normality later this year and the Biden government’s intention of further fiscal stimulus, we believe that GDP growth will be up to 6.5% this year,” he said.
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