money.nikaniku.com – World Gold Prices Rise Today Amid US GDP Report. The gold market, holds solid gains following the latest economic reports. Today’s gold price in the futures market traded at USD 1,741.50 per ounce, up 1.32 percent for August.
Although it may not be an official recession yet, in fact the US economy has contracted for the second quarter in a row.
The Commerce Department said US Gross Domestic Product fell 0.9 percent in the second quarter, missing the market forecast for a 0.4 percent increase.
“The decline in real GDP reflects a decline in private inventory investment, residential fixed investment, federal government spending, state and local government spending, and non-residential fixed investment partially offset by increases in exports and personal consumption spending,” the report said.
The decline in economic activity occurred as US GDP contracted 1.6 percent in the first quarter.
Officially, the National Bureau of Economic Research (NBER) is the agency that officially declares a recession, which usually occurs after months of research and debate; however the traditional definition is when the economy contracts for two consecutive quarters.
Analysts said that a recession in the US would be positive for gold as it could force the Federal Reserve to slow its pace of rate hikes at a time when inflation remains steadily rising.
However, not all economists expect the Federal Reserve to ease its aggressive rate hike stance.
Inflation Main Problem
Andrew Hunter, senior US economist at Capital Economics, said that inflation remains a key issue that the US central bank needs to address.
“Overall, the data confirms that underlying growth has slowed sharply, but with labor market conditions still persisting and inflation too high, it will not convince the Fed to drop its tightening plans,” he said.
According to market analysts, the report shows that inflation has a significant impact on economic growth.
The report said that the quarterly GDP Price Index rose 8.7 percent, up from a first-quarter reading of 8.2. Economists had expected a 7.9 percent increase.
“That loss appears to have been driven in large part by higher inflation dragging down real growth. The deflator at 8.9 percent took an entire percentage point off the headlines compared to expected,” said Adam Button, head of currency strategy at Forexlive.com.
Other Report Contents
The report also noted that personal consumption continued to fall, increasing 1.1 percent in the second quarter, down from 1.8 percent from the first quarter.
The report also shows that US trade is starting to rebound. Exports increased 18 percent in the second quarter while imports increased 3.1 percent.
However, rising interest rates have had an impact on investment spending, especially from consumers. The report said that home investment fell 14 percent in the second quarter, down from a 0.4 percent increase in Q1. On the business side, equipment investment fell 2.7 percent.