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Gold Surges as U.S. GDP Contracts

Release Date: 
Wednesday, January 30, 2013

Gold and silver prices rose significantly in morning trading on the New York Spot Market following news that the U.S. GDP declined in the fourth quarter, the first decline in three years.  The precious metals were also bolstered by a lower U.S. dollar index and higher oil prices. As of 7:33 a.m. Pacific Time, gold prices were up $18.60 to $1683.50 on the New York Spot Market. Silver rose more than 2% to $32.18. (Click here for the most current spot prices.)

The economy reversed course from its 3rd quarter growth largely because federal government spending fell by 15% and private business inventories decreased.  “A technical analyst at GFT Markets wrote, “[i]nvestors rushed to buy gold and silver [on the GDP data] … The metals were already looking bullish anyway following yesterday’s technical bounce, but today’s reaction has nevertheless confirmed that investors still see gold and silver, above all, as safe haven assets….”

"Gold is reasserting itself as a flight to quality asset," agreed Adam Klopfenstein, senior market strategist with Archer Financial.

The Federal Reserve is scheduled to make a policy statement today that will likely offer investors “more of a clue as to how divided the central bank is with respect to its asset buying program and where it sees the economy going,” said Edward Meir, metals analyst at INTL FCStone.  "Bad news means that the Fed isn't going to rein in its QE as quickly as people thought," Mr. Klopfenstein said.

(Sources:  “Gold Jumps On Weaker U.S. GDP Data, Fed Fears Fade,” Wall Street Journal, January 30, 2013; ““U.S. Economy Unexpectedly Contracts in Fourth Quarter,” Wall Street Journal, January 30, 2013; “Gold rises after drop in GDP and ahead of Fed,” Marketwatch, January 30, 2013)

 

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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