Gold prices treading water as U.S. economy slowed further in Q4 and inflation pressures remain elevated

The U.S. Bureau of Economic Analysis (BEA) announced on Friday that the third and final reading of fourth-quarter Gross Domestic Product (GDP) showed the economy expanded by 0.5%, down from the second estimate of 0.7%.

The data significantly missed expectations, as economists had projected an unchanged reading. Economic growth in the final three months of last year has been revised down sharply, with the first estimate showing growth of 1.4%.

Alongside weak growth data, the BEA also released its Personal Consumption Expenditures Index, which showed that inflation remained elevated but stable in February.

Core PCE, which strips out volatile food and energy prices and is the Federal Reserve’s preferred inflation measure, increased by 0.4% in February, matching January’s 0.4% increase. Consumer prices rose in line with expectations.

Over the last 12 months, core PCE rose to 3.0%, down from 3.1% reported in January. Annual inflation also came in line with economists’ projections.

The gold market is not seeing any significant reaction to the disappointing economic and inflation data and remains capped below initial resistance at $4,800 an ounce. Spot gold last traded at $4,743.20 an ounce, up 0.5% on the day.Meanwhile, headline inflation rose 0.3% in February. Annual inflation remained unchanged at 2.8%.

Along with stubborn inflation, the report’s consumption data shows growing risks to U.S. economic activity. Personal spending increased 0.5% in February, up from 0.4% in January; however, the data missed expectations as economists were forecasting a 0.6% increase.

Meanwhile, personal income dropped sharply to -0.1%, compared to January’s increase of 0.4%. Economists were looking for 0.3% increase.