(Kitco News) - The gold market continues to build on Monday’s gap higher, and with inflation pressures expected to ease, the precious metal could attract some safe-haven interest as the U.S. housing sector struggles, as construction remaining sluggish.
Housing starts fell more than 15% in May to a seasonally adjusted annual rate of 1.18 million units, the Commerce Department announced on Tuesday. The data was significantly worse than expected, as economists had forecast relatively stable activity of around 1.43 million units. Adding to the disappointing news, April’s numbers were revised sharply lower to 1.39 million units.
Construction activity is down 8.9% compared to May 2025.
Meanwhile, the report also showed that it is unlikely the housing market will see a strong rebound later in the year. The report said that building permits for future homebuilding fell 0.7% to 1.413 million last month, which was relatively in line with consensus estimates. The number of permits issued in April was revised lower to 1.423 million.
The gold market is not seeing a major reaction to the disappointing housing data but continues to attract a steady bid as prices trade near session highs. Spot gold last traded at $4,349.40 an ounce, up nearly 1% on the day.
Jeffrey Roach, Chief Economist at LPL Financial, said that he expects the housing market to impact second-quarter GDP growth.
“The monthly numbers are volatile, but that said, we normally don’t see this drastic of a decline in housing starts,” he said. “Given the slowdown in new housing construction, residential investment will likely drag on GDP growth this quarter. In Q1, this category subtracted a quarter point from headline GDP and we could expect something a bit worse for Q2. In sum, we still have a tight housing market.”
