Gold rebounded to pressure yesterday’s ten-week high at 1325.96. The yellow metal was boosted by an absolutely terrible final revision to Q1 GDP, which showed the economy contracted at -2.9% annual pace in the first three-months of the year.
You may recall that initial Q1 GDP estimates early in the year were on par with the 2.6% growth realized in Q4-13, but projections steadily ratcheted lower throughout the quarter. By the time the BEA’s advance report came out, Q1 growth was a meager 0.1%. The second revision saw a cut to -1.0%. At that point, most analysts realized that the final print would be even worse. The median estimate was running around -1.7%.
The end result though, was the worst drop in growth since Q1-09, the dog-days of the Great Recession. Jeffry Bartash of Dow Jones provided a little additional perspective:
Deutsche Bank’s chief U.S. economist Joe LaVorgna was more overt in his warning:
The shock of this stunning collapse in economic activity, driven largely by much weaker than expected personal consumption, has severely rattled market perceptions of the recovery. “A 3 percent annual growth rate is starting to seem like the promise made by the White Queen in ‘Alice in Wonderland,’” said the Washington Post‘s Ylan Q. Mui.
I am reminded once again of Tangent Capital’s James Rickards prescient assertion early in the new year that the Fed was tapering into weakness, and in doing so before achieving their own growth and inflation criteria. “The danger now is that they cause a recession,” Rickards stated in a February interview.
I wrote last week that gold’s gains back above the $1300 level significantly improved the technical picture and went a long way toward confirming the cycle lows at 1182.10/1179.83. The latest In Gold We Trust report from Incrementum AG of Lichtenstein seems to agree: “We are therefore convinced that the technical picture has been repaired and that a stable bottom has formed.”