The British pound remained unchanged against the dollar in early European trading on Monday, priced at $1.2566, following revised figures indicating zero growth for the UK economy in the third quarter. This stagnation has ripple effects across various markets, including gold and oil.
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The Office for National Statistics (ONS) downgraded its initial estimate of UK gross domestic product (GDP) growth for the July-September period from 0.1% to 0%. This revision reflects a stagnant services sector, offsetting a 0.7% increase in construction by a 0.4% decline in production. Early estimates also revealed a 0.2% decrease in real GDP per capita and stagnant real household disposable income. The household saving ratio dipped slightly to 10.1% from 10.3% in the second quarter. These figures contrast with the 0.4% and 0.7% GDP growth recorded in the second and first quarters, respectively.
Deeper Dive into UK Economic Slowdown
Liz McKeown, director of economic statistics at the ONS, attributed the weaker economic performance to underperformance in sectors like hospitality, legal services, and advertising. She noted the slight decline in the household saving ratio, albeit remaining historically high. The lack of growth in real household disposable income per head further underscores the economic challenges. This economic stagnation raises concerns about the overall health of the UK economy and its potential impact on global markets.
Gold Prices Respond to US Inflation Data
Gold prices remained relatively stable on Monday morning, retreating slightly after gains spurred by cooler US inflation data, which fueled hopes for further monetary policy easing. Spot gold price inched up by nearly 0.3% to $2,629.84 per ounce, while gold futures held steady at $2,644 per ounce.
The November personal consumption expenditures (PCE) index, the Federal Reserve’s preferred inflation gauge, registered a lower-than-anticipated 2.4% year-on-year increase. This data release follows a decline in gold prices last week after the Fed signaled a slower pace of rate cuts in 2025. Lower interest rates typically benefit gold as a non-yielding asset. Ajay Kedia, director at Kedia Commodities, Mumbai, attributed the recent gold price movements to short-covering and technical support, particularly in anticipation of the holiday season.
Oil Prices Rise Amidst Geopolitical and Economic Uncertainty
Oil prices experienced an upward trend on Monday, driven by speculation surrounding interest rates and trade concerns that could impact supply. Brent crude futures rose 0.5% to $73.33 a barrel, while US West Texas Intermediate (WTI) crude climbed 0.6% to $69.90.
Contributing to the price increase were comments by then US president-elect Donald Trump, who threatened to regain control of the Panama Canal, citing excessive fees and potential Chinese influence. Panamanian President Jose Raul Mulino refuted these claims, asserting Panama’s sovereignty over the canal. Susannah Streeter, head of money and markets at Hargreaves Lansdown, highlighted the potential disruption to trade routes and supply chains if the Panama Canal’s operation were affected. She also noted that renewed hopes for faster monetary policy easing next year, following signs of slowing inflation, contributed to the rise in oil prices.
Conclusion: Interconnected Global Markets React to Economic Shifts
The UK’s economic stagnation, coupled with fluctuating gold and oil prices influenced by US inflation data and geopolitical factors, underscores the interconnectedness of global markets. The revised GDP figures for the UK raise concerns about the country’s economic outlook, while the response of gold and oil prices highlights the sensitivity of these commodities to economic and political developments. Investors should closely monitor these trends to make informed decisions in a dynamic global market.
