Gold has continued to accrue new fuel for higher prices this week thanks to disappointing GDP figures and an unexpected decline in new homes data. Thursday’s GDP data fell 0.8% short of expectations at 2.0%, while the PCE price index also failed to match the performance of the previous quarter, posting a 5.3% increase, down on the 6.7% increase reported in Q2. The worse than expected GDP data pushed the US dollar sharply lower, giving gold the edge. The yellow metal ticked up past the important £1,305 ($1,800) marker in trading yesterday (Thursday) as a result.
Also adding to gold’s strength was an unexpected dip in new homes construction, while the European Central Bank also chipped in with additional reasons to buy gold with its observation that the EU economy had not yet recovered sufficiently to justify a change in economic policy. The Bank’s bond-buying policy was confirmed until the first quarter of next year, suggesting the weaker economy may not bounce back in the near term.
Against this backdrop, gold is stronger than ever as a risk averse asset, portfolio diversifier, hedge against inflation and economic turmoil and a safe store of wealth.