Gold pared some losses but remained 0.7% lower, trading around the $3,290 mark, as a weaker-than-expected U.S. GDP report for the first quarter of 2025 reignited fears of an impending recession in the world’s largest economy amid intensifying trade tensions.
Gold cuts losses after weak US data
The U.S. economy unexpectedly contracted by 0.3% between January and March, missing consensus estimates for 0.3% growth. The contraction was driven in large part by a dramatic 41.3% surge in imports, as both consumers and businesses accelerated purchases to hedge against looming cost increases tied to a new wave of tariffs announced by the Trump administration. The import surge widened the trade deficit and weighed heavily on headline GDP.
Further stoking recession fears, the ADP National Employment Report showed private payrolls rose by just 62,000 in April—less than half the projected 115,000—marking the slowest pace of job growth since July 2024. The unexpectedly weak labor market data underscored growing signs of economic fragility and added to speculation that the Federal Reserve may be forced to ease policy sooner than previously anticipated, despite persistent inflation risks.
Broader trend remains bullish
Although gold dipped on the day, likely pressured by modest profit-taking and a slight rebound in the dollar, the broader trend remains decisively bullish. The precious metal is still on track for a fourth consecutive monthly gain, up over 6% in April alone, and has repeatedly hit new record highs in recent weeks. Investor demand has been buoyed by escalating geopolitical tensions, particularly between the U.S. and China, and by concerns over the durability of the U.S. economic expansion amid tightening financial conditions and shifting global trade dynamics.
In addition to its role as a hedge against economic uncertainty, gold continues to attract safe-haven flows as real yields remain relatively subdued and volatility rises across equities and bonds. Central bank demand, particularly from emerging markets, has also lent support to prices, reinforcing a structural bullish case. With market participants now increasingly pricing in the possibility of Fed rate cuts later in the year, gold’s appeal as a store of value may continue to strengthen in the near term.
