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US GDP Misses Expectations—Is Gold Reacting?


Jun. 29 2018, Updated 12:50 p.m. ET

Buffer to economic unrest

Gold posted a fifth straight day of decline on Thursday, June 28, touching a fresh six-month low of $1,244.80. Gold ended the day at $1,247.80 per ounce. The precious metal trended lower despite the drawdown of the US dollar and the lower-than-expected US economic data.

The quarterly GDP reached 2.0%, lower than the analysts’ forecast of 2.2%. GDP numbers are a measure of the annualized change in the inflation-adjusted value of all goods and services produced by the economy. The lower GDP report appeared to be detrimental to economic sentiment, and economic uncertainty often provides buoyancy to haven assets such as gold. However, that scenario didn’t come to pass. Typically, investors flock to haven assets such as gold, silver, and Treasuries whenever the economy seems unsteady.

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Another major factor that could have caused gold to dive to its six-month low is the concern about the US-driven trade wars. Global equities (SPY)(FXI) also slipped to their lowest levels in almost three months as President Donald Trump outlined his plans to curb the Chinese acquisition of American technology companies.

This scenario would ideally lift precious metals—another event that didn’t come to pass. It remains to be seen whether if further market unrest could provide some support to gold and the other precious metals.

GLDM launched

The World Gold Council and State Street Global Advisors, which is the third-largest US ETF issuer, issued a new gold mini ETF—the SPDR Gold MiniShares Trust ETF (GLDM). GLDM was initially listed at the price of 0.01 ounce of gold.

Most mining companies also saw a down day on June 28. The biggest losses for the day were felt by Hecla Mining (HL), Eldorado Gold (EGO), Sibanye Gold (SBGL), and Pretium Resources (PVG), which declined 6.3%, 7.6%, 4.0%, and 5.2%, respectively.


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