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Gold Prices Drop Following Solid U.S. June Retail Sales Data

Kitco News

(Kitco News) - Gold prices are under pressure but continue to hold above $1,400 an ounce as it competes with rising “risk on sentiment in the market place” as U.S. consumers spend more than expected last month.

Tuesday U.S. retail sales rose 0.4% in June following May’s revised increase of 0.4%, according to the latest data from the U.S. Commerce Department; the data was better than as economists were expecting to see an increase of 0.1%.

Core sales, which strips out vehicle sales increased 0.4% last month, compared to May’s revised increase of 0.5%. The data was also beat expectations.

Meanwhile, the control group, which excludes autos, gas, building materials, and food services increased 0.7% last month, beating the expected rise of 0.3%.

Gold prices were modestly positive ahead of the data and have dipped into negative territory in initial reaction. August gold futures last traded at $1,411.60 an ounce, down 0.15% on the day.

According to some economists retail sales saw a boost last month as lower gasoline prices provided consumers with more disposable income. Royce Mendes, senior economist at CIBC noted that spending on gasoline droped 2.8% in June.

Although the data continues to highlight a healthy consumer market, some analysts don’t expect the data to shift market expectations for the Federal Reserve to cut interest by the end of the month.

“The old adage is still true: Never underestimate the spending power of the US consumer,” said Adam Button, managing director of Forexlive.com. “As for the Fed, the worry isn't generally about the consumer. Powell said consumption was solid in his testimony last week.”

Mendes also does not expect the latest report to have much impact on interest rate expectations.

"Overall, the numbers should reduce market pricing for more than a quarter-point rate cut by the Fed later this month, but shouldn't do much to alter most Fed members' belief that policy needs to be eased at the next meeting," he siad.

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