Gold Rises on Weak U.S. Growth, Falling Dollar

FeaturesDow Jones Newswires

Gold prices settled higher Friday, supported by disappointing U.S. economic growth data and a weak dollar.

Gold for December delivery settled up 1.2% at $1,357.50 a troy ounce on the Comex division of the New York Mercantile Exchange, its fourth consecutive day of gains.

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For the second quarter, U.S. gross domestic product grew at a seasonally adjusted annual rate of 1.2%, the Commerce Department said Friday. Economists surveyed by The Wall Street Journal had forecast growth of 2.6%. The figure is the broadest measure of goods and services produced across the U.S.

The weaker-than-expected data cast doubt on whether the Federal Reserve would raise interest rates by the end of the year. Gold becomes more attractive to investors compared with yield-bearing assets when interest rates are low. Analysts said gold also benefited from safe-haven demand on a more dismal economic outlook.

"The flight to safety is real right now," said Bob Haberkorn, senior market strategist at RJO Futures, adding that Friday's GDP figure "puts the nail in the coffin" for an interest-rate increase by year's end.

The precious metal gained as the dollar fell against major currencies. The WSJ Dollar Index, which measures the dollar against 16 other currencies, was recently down 1.3% at 86.53. Gold is priced in dollars and becomes cheaper to foreign buyers when the U.S. currency weakens.

Earlier in the day, gold prices spiked briefly after the Bank of Japan said it would buy Yen6 trillion ($57 billion) worth of exchange-traded stock funds annually, up from Yen3.3 trillion. Investors had expected the central bank to implement more monetary stimulus than was announced, in an effort to reboot its economy and boost inflation.