(Kitco News) - Recession fears could ease slightly and soften safe-haven demand for gold as U.S. consumers remain resilient in the face of slowing economic activity and rising prices.
U.S. retail sales rose 0.6% in August, following a revised 0.6% increase in July, the U.S. Commerce Department announced Tuesday. The data was stronger than expected, as economists had projected a 0.2% gain for last month’s headline number.
Over the past 12 months, retail sales increased 5%, the report noted.
Meanwhile, core retail sales—which exclude vehicle sales—rose 0.7% in August, well above the consensus forecast of a 0.4% increase and compared with July’s revised 0.4% gain.
The report also said that the control group—excluding sales from auto dealers, building-materials retailers, gas stations, and office supply stores, and which feeds directly into U.S. GDP—rose 0.7%, beating expectations for a 0.4% increase.
Despite some modest volatility in the initial reaction to the strong data, gold prices are holding firm, moving closer to $3,700 an ounce. Spot gold last traded at $3,691.20 an ounce, up 0.36% on the day.
Although consumer spending remains resilient, the better-than-expected data has had no impact on interest rate expectations as the Federal Reserve begins its monetary policy meeting. Markets continue to expect a 25-basis-point cut on Wednesday and see rates potentially 100 basis points lower by year-end.
Jeffrey Roach, Chief Economist for LPL Financial, said U.S. consumers’ solid footing should reduce recession risks.
“After today’s release, I now expect Q3 GDP will hold above 1%, quarter over quarter. Further, it’s important to note that historically, risk assets perform well when the Fed starts cutting rates in non-recessionary environments,” he said.
