(Kitco News) - The gold market has managed to bounce off its session lows but remains under significant selling pressure, even as the U.S. economy continues to cool and inflation pressures remain relatively muted — conditions analysts say could give the Federal Reserve room to cut interest rates by the end of the year.
The Bureau of Economic Analysis announced the preliminary reading of first-quarter Gross Domestic Product on Thursday, saying the economy grew 1.6% quarter over quarter, down from the initial estimate of 2.0%. The data came in weaker than economists' expectations, with consensus forecasts calling for growth to hold steady at 2.0%.
“Real GDP was revised down 0.4 percentage point from the advance estimate, primarily reflecting downward revisions to investment and consumer spending,” the report said.
“Within investment, the revision primarily reflected a downward revision to private nonfarm inventory investment, led by manufacturing and retail trade, based primarily on revised U.S. Census Bureau inventory book value data,” the report said. “The revision to consumer spending reflected a downward revision to services that was partly offset by an upward revision to goods. Within services, the largest contributor to the downward revision was health care (outpatient services as well as hospital and nursing home services), based primarily on U.S. Census Bureau Quarterly Services Survey data.”
The weak economic activity appears to be cooling inflation pressures. In a separate report, the BEA said its core Personal Consumption Expenditures Index, which excludes volatile food and energy prices and is the Federal Reserve’s preferred inflation gauge, increased 0.2% last month, compared to a 0.3% increase in March.
Economists had expected to see a 0.3% increase.
For the year, core inflation rose 3.3%, in line with economists' expectations. Some economists note that despite slower economic growth, inflation remains well above the central bank’s 2% target.
The gold market is seeing some renewed buying momentum in its initial reaction to the latest economic data. Spot gold last traded at $4,409.10 an ounce, down 1% on the day.
The precious metal suffered significant chart damage overnight as prices fell below initial support at $4,500 an ounce.
