Gold prices slipped early this morning, as initial third-quarter GDP estimates were reported at +2.9%, against expectations of a 2.6% read. The moderate losses soon ignited bargain hunting, sending prices back into positive territory.
Spot gold ended Thursday with marginal gains, $1.40 higher at $1,268.10/oz. December gold futures on the COMEX exchange settled $2.90 higher, at $1,269.50/oz.
Spot silver came in flat on Thursday, giving up gains as much as 21 cents earlier in the session. December silver futures settled a minuscule 1.3 cents higher, to end at $17.639 an ounce.
The Commerce Department released the initial report of third-quarter GDP this morning, showing that the US economy grew at a stronger pace than expected. Initial gross real GDP for the three months ending September came in at 2.9%, against expectations of 2.5% and up from the 1.4% recorded in the second quarter. This is the fastest quarterly growth in exactly two years (third quarter of 2014).
The Bureau of Economic Analysis reminds people that initial GDP reports are based on incomplete data. The second and third GDP reports are based on additional data that comes available at later dates.
The third-quarter GDP report was good news for the Fed, but news that the growth in Personal Consumption Expenditures (PCE) had slowed will moderate any enthusiasm. The PCE is the Fed's preferred measure of inflation. Still, the news is pretty much seen as going into the "hike" column in Fed policy. Markets are giving odds of 78.5% to a December rate hike.
Celebrations of a recovering US economy were muted this morning by news that consumer confidence in September fell to its lowest point since 2014. The reading fell from 91.2 to 87.2 and helps explain lower consumer spending in this morning's GDP report. Only 35% of those surveyed believed that things will be better for them in the future. The logical reason for this would be the presidential election, where both candidates are hated by a substantial portion of the population.
Speaking of the election, it hasn't served as a deterrent to merger and acquisition activity, much to Wall St's delight. In fact, this is the most active month for mergers in history, totaling $248.9 billion. The previous all-time busiest month for mergers was $240 billion in July 2015.
Such moves are usually put off until the market can see which party will be running the White House for the next four years. Recent populist opposition to these mega-mergers has translated into harsher scrutiny from Capitol Hill, but the quest to grow sales and profits in a lackluster economy have more CEOs looking to combine with rivals.
Central banks have been praying for inflation to rise seven years, and their wishes may finally be coming true. Inflation in Germany this month hit the highest point since October 2014. The year-over-year reading of +0.7% beat economists' expectations of 0.6%, and was a rise of two-tenths percent from September's +0.5%.
Bank of England governor Mark Carney is getting too much of a good thing in the UK economy. The destruction of the British pound's value since the June 23rd Brexit vote is putting the squeeze on consumers. In addition to spiraling food prices, imports of all kinds are seeing big increases.
Last night, Apple raised prices in the UK by 20%, and Microsoft earlier announced price increases for enterprise software and cloud services that will take effect January 1. With prices rising on everything from clothing, to cars, to Kit Kats, the squeeze on British consumers is set to make for a very Scrooge-y Christmas in the UK. (Just a reminder: gold has been used to preserve purchasing power in the face of a falling currency for centuries.)
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