Gold Prices Rise Sharply Following Weaker U.S. Q4 GDP

(CEP News) - Weaker than expected revisions to Q4 U.S. GDP caused investors to once again flee to gold in a “flight to quality” move.

The preliminary revisions to U.S. GDP were worse than expected for the fourth quarter of 2008, contracting by -6.2% against forecasts for a 5.4% decline, the Bureau of Economic Analysis reported on Friday. Prior to the release, forecasts for Q4 GDP ranged from -3.8% to -6.0%.

Gold price appear to be move inversely with equity markets. Equities dropped following the GDP report and at same time the CBOT spot prices hit session highs of $963.17 an ounce. Although prices have fallen slightly following a modest rally in equities support is holding at $950.

Mike Glaser, futures broker at LaSalle Futures said if gold can close above $950 it could be a bullish sign for Monday’s open. Although prices have backed off after hitting $1,000, Glaser said that the drop hasn’t been as sharp as compared to last year’s sell off.

“Given the severe economic downturn, I think $900 will probably hold as support,” he said.

Jimmy Tintle, futures broker at Transworld Futures.com agrees that the recent pullback in gold prices is just a short term correction.

He added the doom and gloom of the economic data will continue to support gold prices. He is looking for gold prices to continue to move higher and retest resistance at $980.

“It is going to be tough to break $980 and I think we will end up trading sideways at that level,” he said.

WTI Crude oil is down $1.92 to $43.30 while ICE crude oil is trading down $1.31 to $45.20.

Meanwhile, ICE RBOB gasoline futures are down $1.70 to $137.25 and Globex natural gas is unchanged at $1.27. Heating oil at the ICE is up $6.28 to $131.80.

In the mining sector, spot gold is trading up $5.96 to $952.16 USD. In Canadian dollars, gold is up $19.76 to C$1206.04. Silver contracts at the CBOT are up $0.32 to $13.29.

Bloomberg’s index for base metals is down 1.36 points to 110.42. Wheat futures at the CBOT are down $2.00 to $523.00.

All data taken at 11:02 a.m. EST

By Neils Christensen, neilsc@economicnews.ca

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Posted in Categories: Commodities, Economy, Eurozone, Releases, USA.

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