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Gold Prices Pop on Weak GDP Report

NEW YORK ( TheStreet) -- Gold prices were popping Wednesday after a surprising contraction in U.S. gross domestic product pushed investors back into the safe-haven asset. Gold prices gained 0.48% on Tuesday.

Gold for April delivery was jumping $19.70 to $1,682.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,684 and as low as $1,663.50, while the spot price was adding $17.70, according to Kitco's gold index.

"I did not expect a negative number but ... gold is still kind of within its trading range," said Oliver Pursche, co-portfolio manager at GMG Defensive Beta Fund.

The Bureau of Economic Analysis reported Tuesday that fourth-quarter gross domestic product in 2012 contracted 0.1%, compared against third-quarter growth of 3.1%. The preliminary reading could later be upwardly revised, but the first print weakened confidence enough to sink major U.S. equity markets early on Wednesday.

Consensus among economists polled by Thomson Reuters were expecting GDP to rise 1.1%.

Silver prices for March delivery were increasing 82 cents to $32.01, while the U.S. dollar index was sinking 0.38% to $79.27.

Comex gold trades will settle at 1:30 p.m. EST, but the Federal Reserve will make a policy-making meeting announcement at 2:15 p.m.

Gold prices plummeted 1.5% on Jan. 4 when the Fed announced a split in sentiment among members of the Federal Open Market Committee as to how much longer the central bank should continue its monetary stimulus programs. Multiple members said they wanted to end quantitative easing by the end of 2013 or well before the end of the year. Others reiterated their commitment to considerable accommodative policy.

The fear among gold traders is that if the Fed ends its open-ended mortgage-backed securities and longer-term Treasuries purchases, then inflationary pressures would subside and damper the yellow metal's appeal.

"I do think that where a month ago ... there were some discussions about [quantitative easing] ending sooner rather than later and the economy picking up and thereby inflation picking up, you're kind of saying, 'Well, gee, that may not be quite so true as we felt two or three weeks ago," Pursche said.
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