Consumers Curb US Economic Growth in Q1

Shoppers show up early for the Black Friday sales at the King of Prussia shopping mall in King of Prussia, Pennsylvania, US November 26, 2021. REUTERS/Rachel Wisniewski Purchase Licensing Rights
Shoppers show up early for the Black Friday sales at the King of Prussia shopping mall in King of Prussia, Pennsylvania, US November 26, 2021. REUTERS/Rachel Wisniewski Purchase Licensing Rights
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Consumers Curb US Economic Growth in Q1

Shoppers show up early for the Black Friday sales at the King of Prussia shopping mall in King of Prussia, Pennsylvania, US November 26, 2021. REUTERS/Rachel Wisniewski Purchase Licensing Rights
Shoppers show up early for the Black Friday sales at the King of Prussia shopping mall in King of Prussia, Pennsylvania, US November 26, 2021. REUTERS/Rachel Wisniewski Purchase Licensing Rights

The US economy grew more slowly in the first quarter than previously estimated after downward revisions to consumer spending and a key measure of inflation ticked down, keeping the Federal Reserve on track to possibly begin cutting interest rates at least once before the end of the year.
Gross domestic product - the broadest measure of economic activity - grew at an 1.3% annualized rate from January through March, the Commerce Department reported on Thursday, down from the advance estimate of 1.6% and notably slower than the 3.4% pace in the final three months of 2023, Reuters reported.
The first-quarter growth downgrade suggests the US central bank's aim of gradually cooling the economy through high interest rates is having an impact as consumers increasingly balk at higher prices, although it remains uncertain whether the weakening trend in inflation will continue. Corporate profits dropped for the first time in a year, falling 0.6% to $3.39 trillion from the fourth quarter's record high.
"The downward revision to economic growth as well as smaller downward revisions to inflation make the Fed a little more likely to start reducing interest rates by September," said Bill Adams, the chief economist at Comerica Bank. "With the economy operating in low gear, a margin of slack capacity is opening up, and consumers are feeling less flush."
That was illustrated by data from the National Association of Realtors on Thursday that showed contract signings for US home purchases fell by the most in three years in April and the overall level of activity was the lowest since the onset of the COVID-19 pandemic in the spring of 2020.
Details of the GDP report showed that consumer spending growth, revised down by half a percentage point to a 2.0% annualized rate, mostly reflected a larger-than-earlier-reported drop in household spending on goods. Outlays for big-ticket durable goods like motor vehicles and parts dragged on growth by the most since the third quarter of 2021. That drag outpaced upward revisions in the report to business investment, driven mostly by spending on Artificial Intelligence and other technologies, and residential investment outlays, which reflected increased single-family homebuilding.
A measure of inflation during the first quarter was also revised down to 3.3% from 3.4%, the stiffest quarterly price-pressure growth in a year.
After easing through much of last year, measures of inflation came in higher than expected to start 2024, driving Federal Reserve policymakers to push back expectations for when they'll be able to pivot to interest rate cuts.



Gold Eyes Best Quarter in over Eight Years

A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)
A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)
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Gold Eyes Best Quarter in over Eight Years

A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)
A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)

Gold halted its record run on Friday but remained on track for its best quarter since 2016 after a rally catalysed by an outsized US Federal Reserve interest rate cut, while markets braced themselves for a crucial inflation report due later in the day.

Spot gold was down 0.1% at $2,666.50 per ounce as of 1115 GMT, below the all-time peak of $2,685.42 hit in the previous session. It is heading for its best quarter since the first three months of 2016.

US gold futures fell 0.2% to $2,688.90, Reuters reported.

"The market at this point in time has priced in all the good news and there's also some hesitancy from fresh buyers to get involved at these record high levels," said Ole Hansen, head of commodity strategy at Saxo Bank.

Bullion has risen 29% so far this year, hitting successive record peaks after last week's half-percentage-point cut by the Federal Reserve and the stimulus measures announced by China earlier this week.

Silver prices surged, tracking bullion's strong performance, though some analysts warn that the rally may fade.

"Overall, industrial demand is still supportive for silver. But we need to have a stronger economic performance in China as well as in other developed countries," said ANZ commodity strategist Soni Kumari.

The surge in silver prices is more a spillover impact from gold, Kumari said.

Spot silver eased 0.1% to $31.98 per ounce, after hitting its highest since December 2012 at $32.71 on Thursday. It is set for a third straight week of gains.

"I do believe silver will continue to outperform gold. But as we all know, wherever gold goes, silver tends to go, but faster," Hansen added.

Both gold and silver serve as safe-haven investments, but the latter has more industrial applications, so tends to underperform during recessions and outperform when economies expand.

Inflows into gold exchange-traded funds, particularly from Western investors, are set to rise in coming months, adding yet more positive stimulus for already record high bullion prices. Some banks expect gold to rise towards $3,000.

In other metals, platinum was up 0.5% at $1,012.40 but palladium fell nearly 1.5% to $1,031.75.