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Gold price holding gains following 1.6% drop in U.S. housing starts, building permits down 7.7%.

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(Kitco News) - The gold market is holding on to solid gains but is seeing little new momentum following disappointing U.S. housing construction data.

The U.S. housing sector was a pillar of strength for the U.S. economy last year as it reeled from the effects of the COVID-19 pandemic. However, that strength continues to wain as commodity prices drag activity down, according to some analysts.

Housing starts dropped 1.6% to a seasonally adjusted annual rate of 1.55 million units last month, the Commerce Department said on Tuesday. The data was weaker than expected; according to consensus forecasts, economists expected relatively stable activity at 1.61 million units.

For the year, housing construction is up 7.4%, the report said.

"Given high prices, the crux of the issue here is getting the supplies and workers to build the homes," said Adam Button, chief currency strategist at Forexlive.com

Meanwhile, building permits, a precursor to future projects, fell 7.7% to 1.589 million in September, down from August's revised total of 1.721 million. For the year, building permits are virtually unchanged from September 2020.

The gold market is holding steady following the latest housing market data. December gold futures last traded at $1,779.20 an ounce, up 0.76% on the day.

“The near-term outlook continues to be clouded by supply bottlenecks. With starts falling over Q3, and construction spending decelerating into August, residential investment will likely have subtracted from growth again in Q3,” said Katherine Judge, senior economist at CIBC.

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