Gold Price Ends Higher on GDP Report
New York (May 30) Gold prices rose Friday as some investors wagered that weaker U.S. economic data would prompt the Federal Reserve to stand pat on interest rates.
The most actively traded contract, for August delivery, rose $1, or 0.1%, to settle at $1,189.80 a troy ounce on the Comex division of the New York Mercantile Exchange. Gold rose 0.6% in May and is up 0.5% on the year.
Gold prices jumped to $1,194.40 an ounce Friday after a Commerce Department report showed the U.S. economy shrank 0.7% in the first three months of the year, a downward revision from an earlier estimate of 0.2% growth. Economists expected gross domestic product, the sum of all the goods and services produced, to contract 1% in the first quarter.
“With economic growth still stagnant, it turns away the prospects for the Fed to be raising interest rates in the near future,” said Dave Meger, head of metals trading with High Ridge Futures in Chicago.
Gold doesn’t pay interest or dividends and has an easier time competing with yield-bearing assets like bonds and stocks when rates are pinned near zero.
While gold prices pulled back throughout the day as the dollar inched higher, traders continue to weigh the impact of the U.S. economic data on future Fed policy.
“There’s a wait-and-see mentality in the market right now,” said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago.
Mr. Haberkorn said Friday’s poor GDP report negated a lot of the upbeat U.S. economic readings the market saw earlier this week. However, investors will now turn their sights to the nonfarm payrolls report, due next Friday.
The U.S. labor market readings are the top indicator of economic health followed by the Fed, and signs of weakness could help spark life in gold prices, Mr. Haberkorn said.