Gold Price Settles After Recent Spike On GDP Fears

The price of gold has seen an incredibly strong run as of late, and for good reason. Recently, GDP data was released for the United States and Europe. This data was overwhelmingly negative, leading to strong safe haven demand. However, we're seeing a correction today, bringing the price of the precious metal down from recent highs. Today, we'll talk about the recent GDP data, why it led to gains in gold, why we're seeing declines today, and what we can expect to see moving forward. So, let's get right to it!

US GDP Misses The Mark In A Big Way

As mentioned above, we recently received data with regard to the growth in the gross domestic product, or GDP, in the United States. During the second quarter of the year 2016, US GDP grew by 1.2%. This is an overwhelmingly negative result. After all, it falls far shy of analyst expectations at 2.6% growth. To make matters worse, the GDP estimates for the first quarter of 2016 have been revised downward. When you average GDP growth in the first half of the year, the total comes to about 1%. So essentially, the United States economy is growing at a rate that's close to nothing!

This is overwhelmingly bad news for the global economy. Think about it. The United States is the world's largest economy. Around the world, Japan, China, Europe, the UK, and several other economies are on the brink of a recession. These economies depend on the United States. With poor economic movement out of the United States, global implications can be huge. As a result, safe haven demand shot upward, leading to gains in the price of gold.

European Economic Data Didn't Do Any Better

Following the release of US GDP data, we got the same report out of Europe. Unfortunately, things didn't go much better. In the first quarter, Europe's GDP grew by a modest 0.6%. However, in the second quarter conditions got worse as a result of the Brexit vote. In the second quarter of 2016, European GDP grew by only 0.3%.

Europe is another very important economy to follow when investing in anything. The 19 member, single currency zone is one of the top 5 economies in the world. With such negative economic data out of the region, we saw an even heavier push for safe havens. This led to further demand for gold and further gains in the price of the commodity.

Why Gold Is Declining Today

While gold has seen strong gains recently as a result of weak GDP data, today was a new day with a strong report out of the US economy. Today, the ADP National Employment report showed strong jobs growth in the country. During the month of July, the report showed that the United States added 179,000 jobs to its economy. This was incredibly positive news, coming ahead of forecasts of 170,000 jobs. As a result, investors are seeing economic hope, leading to a correction in the price of gold.

What We Can Expect To See Moving Forward

While the price of gold saw some headwinds today, I maintain an overwhelmingly bullish opinion of what we can expect to see. The reality is that US jobs have been very volatile as of late. Sure, we had a good month in July, but growth throughout the year has been incredibly concerning. With GDP growth showing that we are near recession levels, and economic conditions around the world continuing to fall apart, I'm expecting to see further increases in safe haven demand and more growth in the price of gold.

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