(Kitco News) - The gold market has pushed into positive territory as the latest economic data shows U.S. consumers have started tightening their belts and adjusting their spending habits.
U.S. retail sales rose 0.1% last month following a downwardly revised drop of 0.2% in April, the U.S. Commerce Department announced Tuesday The data was significantly below expectations, as economists' consensus calls projected a 0.3% reading in May’s headline number.
Core sales, which exclude vehicle sales, fell 0.1% last month, also missing economist expectations for a 0.2% increase. April’s data was also revised lower, falling 0.1%.
Meanwhile, the report said that the control group, excluding sales from auto dealers, building-materials retailers, gas stations, office supply stores, which also feeds directly into U.S. GDP, increased 0.4%, in line with expectations. However, last month’s data was revised down, falling 0.5%, from the initial estimated decline of 0.3%.
The gold market was trading in slightly negative territory ahead of the data but has moved into the green in its initial reaction to the disappointing consumption numbers. August gold futures last traded at $2,334.an ounce, up 0.21% on the day.
Adam Button, head of commodity strategy at Forexlive.com said that the data is “undoubtedly negative for the US dollar and positive for bonds,” creating a positive environment for gold.
Analysts have said that slowing economic growth could force the Federal Reserve to cut rates sooner than expected, even if inflation remains stubbornly elevated.
“With services consumption growth slowing in recent months and consumer confidence plummeting again, maybe households aren’t quite as impervious to higher interest rates as we were beginning to believe. Admittedly, we don’t expect a full-blown slump in consumption but, at the margin, even a modest slowdown in consumption growth (and consequently GDP growth too) could be enough to tip a finely balanced Fed in favour of a rate cut in September,” said Paul Ashworth, Chief North American Economist at Capital Economics.
