Prices for gold and other commodities slipped Thursday on a report showing a dramatic increase in U.S. economic activity for the second quarter lifted by strong consumer spending and private inventory investment.
After notching gains for two straight sessions, the yellow metal slumped more than 1.5% in morning trading, down $36.41 at $2,362 per ounce. The sell-off affected other commodities, too, including silver, platinum and palladium. Silver had lost more than 4% by Thursday morning and was trading at $27.69 per ounce.
The losses were driven by a one-two punch of data showing an economy growing at a pace that shattered projections and a decrease in unemployment claims.
A report by the U.S. Bureau of Economic Analysis showed that real gross domestic product (GDP) increased at an annual rate of 2.8% in the second quarter according to advance estimates. The figure bested the first quarter increase in GDP of 1.4% and beat Wall Street expectations of 2.1% growth.
The increase was supported by increases in consumer spending, private inventory investment, and nonresidential fixed investment, the bureau reported. Consumer spending remained strong in both goods and services industries.
“The economic expansion is tracking the Goldilocks outlook, which is slower growth and a lower rate of inflation,” Boston College economics professor Brian Bethune told Reuters on Thursday. “Consumer spending is keeping things in motion.”
Meanwhile, a report Thursday by the Department of Labor showed there were 235,000 applications for unemployment relief in the week ending July 20 – a decrease of 10,000 from the previous week’s revised level of 245,000. The figure was in line with investor projections.
The data represent a dramatic about face after dismal reports a day earlier in the housing sector and wholesale and retail inventories, but still didn’t damper market expectations of an interest rate cut by the Fed, currently projected at a 100% likelihood, per the CME FedWatch Tool.
Bullion traders will pay special attention to Friday’s core personal consumption expenditures price index – the Fed’s preferred method of measuring inflation – for some direction on where gold may be headed in the short run.
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