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(Kitco News) - The gold market is holding in neutral territory at a critical resistance point of around $1,980 an ounce, as economic data shows that the U.S. housing market continues to struggle to highlight.
Housing starts dropped by 8% to a seasonally adjusted annual rate of 1.43 million units last month, the Commerce Department said on Wednesday. The data came in weaker than expected as economists looked for a drop to 1.48 million units. At the same time, May's data was revised lower to a rate of 1.56 million units from the previously reported 1.63 million units.
The report said home construction is down 8.1% for the year.
The gold market saw some technical profit-taking ahead of the data after prices surged to a six-week high on Tuesday. However, the disappointing economic data is helping the precious metal hold support at around $1,980 an ounce, roughly unchanged on the day.
The housing market is a significant contributor to U.S. economic activity, and according to some economists, the weak construction numbers could add to fears that the U.S. will slip into a recession by the end of the year.
The report also highlighted potential future weakness as the number of construction permits declined more than expected.
Permits for future homebuilding also rose more than expected, dropping 3.7% to a rate of 1.44 million in June. Economists expected to see a rate of 1.49 million permits, unchanged from last month.
The report added that for the year, the number of authorized permits has declined more than 15% compared to June 2022.
Economists have noted that the U.S. housing sector has struggled since mid-2022 as the Federal Reserve's aggressive monetary policies have driven mortgage rates higher. At the same time, a low supply of homes for sale has kept prices elevated, pricing many new home buyers out of the market.
Gold is catching a bid following the housing data as the bond market sees a slight shift in interest rate expectations. Markets are starting to adjust their calls for a second rate hike after the U.S. central bank meets next week.
