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Gold price hit with new selling pressure following 5.3% rise in U.S. retail sales

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(Kitco News) - Gold prices are falling further into negative territory, trading at session lows as U.S. consumers went on a shopping spree in January, despite the ongoing pandemic.

U.S. retail sales rose 5.3% last month following December’s revised decline of 1.0% according to the latest data from the U.S. Commerce Department, released Wednesday; the data significantly beat expectations as economists were forecasting an increase of 1.1%.

Gold prices were under pressure ahead of the latest consumer data and have given up further ground in initial reaction. April gold futures last traded at $1,775.90 an ounce, down well more than 1% on the day.

Retail sales were strong across the board last month. Core sales, which strip out vehicle sales rose 5.9% last month, following December’s rise of 0.1%. Economists were expecting to see a 0.2% rise.

The control group, which excludes autos, gas, building materials, and food services rose 6%. Economists were expecting to see a 1.0% increase.

Adam Button, chief currency strategist at Forexlive.com, said that the latest retail sales data shows that government stimulus checks are working to support the general economy. However, he added that the latest data still leaves a lot of questions unanswered.

“What does that mean for stimulus prospects? What does it mean for growth/inflation when those $1400 checks come? How does the Fed react to that?,” he said.

While the data significantly surprised to the upside, some economists have warned that the COVID-19 pandemic has created pent-up demand in consumer markets that is just waiting to be released.

“The New Year started on a positive note for US retailers as fresh fiscal stimulus checks helped propel a sizeable rebound in sales in January,” said Katherine Judge, senior economist at CIBC.

Judge added that the latest data bodes well for further consumption growth.

“With additional fiscal stimulus on the way, new Covid cases trending lower, and many states moving to relax social distancing measures, the worst looks to be in the rear view mirror, with spending on services in particular poised to benefit in the months ahead,” she said.

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