(Kitco News)— The gold market is trying to hold support around $2,600 an ounce as mixed consumption data is unable to shed any new light on the health of the U.S. economy.
U.S. retail sales rose 0.1% in August following a revised increase of 1.1% in July, the U.S. Commerce Department announced Tuesday. The data was came in better than expected, as economists' consensus calls projected a0.2% drop in the headline number.
In the last 12 months, retail sales increased 2.1%, the report said.
Core sales, which strip out vehicle sales, were up 0.1% last month, following July’s 0.4% increase. The data missed expectations as economists were looking for a 0.2% increase.
Finally, the control group, which broadly represents the basket used in the GDP estimates, rose by 0.3% in August for the second straight month.
The gold market has seen some renewed selling pressure as it remains near its recent all-time highs above $2,600 an ounce. December gold futures last traded at $2,598 an ounce, down 0.42% on the day.
According to some analysts, gold is seeing some selling pressure as there is still a lot of uncertainty surrounding the Federal Reserve’s impending easing cycle. While markets are pricing in significant easing on Wednesday, economists note that the economic data shows that the U.S. economy remains fairly resilient, at least for now.
“While the sales figures were, clearly, a touch better than participants had expected, the data may only temporarily halt the continued dovish drift in market expectations ahead of tomorrow’s FOMC decision,” said Michael Brown, Senior Research Strategist at Pepperstone. “Markets are, it would seem, trying their hardest to again bully the Committee into their desired course of action, in the knowledge that just once since 2009 have the FOMC delivered a decision that differs by more than 10bp from what markets had priced prior to the announcement itself.”
Brown added that he expects the Federal Reserve to cut by only 25 basis points but provide dovish guidance on its new easing cycle.
Olivia Cross, North America Economist at Capital Economics, said that he also sees a 25 basis point cut next week.
“With control group sales maintaining strong upward momentum, our forecast points to an acceleration in consumption growth in the third quarter. Although it will be a close call, and financial markets are still pricing in around a 65% chance of a 50bp interest rate cut from the Fed tomorrow, we still think that the broader data are more consistent with a 25bp step,” he said. “With consumption still very healthy, for now, recession fears appear overblown.”
