The US economy’s contraction in the first quarter of 2025 is slightly stronger than expected, but still in a contracting phase. The Bureau of Economic Analysis reported that the economy contracted by 0.1% year-over-year, better than forecasted. However, trade imbalances remain a key driver behind the contraction.
Gold prices have gained support as the data was released, with spot gold currently trading at $3,313.70 an ounce, up 0.83%. The report notes that increased imports and decreased government spending contributed to the contraction, while investment, consumer spending, and exports partially offset these losses.
Economists are divided on the significance of the revised data, with some arguing it may be exaggerated due to trade numbers, but others note slowing consumer consumption, as well as stubbornly elevated inflation. The Personal Consumption Expenditures Index rose 3.6%, while the core PCE index increased by 3.5%. Despite this, gold prices remain attractive due to its safe-haven status.
Source: https://www.kitco.com/news/article/2025-05-29/gold-prices-catching-safe-haven-bid-us-gdp-contracts-02-q1