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Gold Prices Holding Near 1-Year Highs Following In-Line U.S. Retail Sales Numbers

Kitco News

(Kitco News) - Gold prices are holding near a one-year high, benefiting from strong risk off sentiment in the marketplace even as U.S. consumers shopped relatively in line with expectations

Friday, U.S. retail sales rose 0.5% in May following April’s revised increase of 0.2%, according to the latest data from the U.S. Commerce Department; the data was a slight miss as economists were expecting to see an increase of 0.7%.

Core sales, which strips out vehicle sales increased 0.5% last month, compared to April’s revised increase of 0.5%. The data was in line with expectations.

Meanwhile, the control group, which excludes autos, gas, building materials, and food services increased 0.5% last month, beating the expected rise of 0.4%.

The gold market is holding on to strong overnight gains, which pushed prices to a more than one-year high. August gold futures last traded at $1,357.10 an ounce, up 1% on the day.

According to some economists, the retail sales data have done little to calm growing fears that a global economic slowdown could transition into a recession. However, looking through the relatively in-line data, some market analysts noted that better-than-expected revision in April add an optimistic tone to the report.

Adam Button, managing director at Forexlive.com said that this data dims expectations that the Federal Reserve will strike a dovish tone at next week’s monetary policy meeting.

Katherine Judge, senior economist at CIBC Capital Markets, said that the latest economic data supports her bank’s base-case view that the Fed won’t cut as early as markets are pricing in.

“Consumer spending appears to be accelerating in Q2, after a soft start to the year that was hindered by the government shutdown,” she said.

However, the report has done little to shift market expectations for a July rate cut. The CME FedWatch Tool shows that markets are pricing in an 88% chance of looser monetary policy next month.

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