(Kitco News) - Relatively steady economic data is prompting some investors to take profits in gold and silver as the Federal Reserve remains on track to raise interest rates to bring inflationary pressures under control.
The U.S. Bureau of Economic Analysis (BEA) announced on Wednesday that the preliminary reading of second-quarter Gross Domestic Product (GDP) showed that the economy expanded by 1.5%, unchanged from the revised initial reading and still down from first-quarter growth of 2.1%.
The data was in line with economists’ expectations. The initial reading for Q2 growth was revised down from 1.6%.
The report also noted that inflation moved sharply higher in the second quarter. The preliminary GDP Price Index rose 6.4% in Q2, up from the initial reading of 6.2%. Economists were expecting an unchanged reading.
However, the BEA also released Personal Consumption Expenditures (PCE) data for July, including the core PCE index, which excludes volatile food and energy prices and is the Federal Reserve’s preferred inflation gauge.
While economic growth remains sluggish, the monthly inflation data showed that consumer price pressures remained relatively benign last month.
The report said that core PCE increased 0.2% in July, up from June’s increase of 0.1%. The increase was in line with consensus estimates.
For the year, core inflation rose 3.3%.
Headline inflation was also relatively muted, even as energy prices remained elevated. Headline inflation rose 0.2% in July, just slightly hotter than expected.
In the last 12 months, headline inflation rose 3.7%. According to consensus forecasts, economists were expecting a 3.6% increase.
The gold market has seen renewed selling pressure in its initial reaction to the data; however, it is still holding initial support above $4,600 perd ounce. Spot gold last traded at $4,623.50 an ounce, down 0.75% on the day.
Analysts have said they see the move as expected profit-taking, with the latest economic data continuing to support the Federal Reserve's tightening bias.
