(Kitco News) - Gold prices remain trapped below $4,000 an ounce and have been unable to attract any significant safe-haven demand despite persistent uncertainty in the U.S. housing sector, which threatens to weigh on economic activity through the second half of the year.
Although construction activity recovered in June after falling to a six-year low in May, the sector continues to struggle.
Housing starts jumped 19% last month to a seasonally adjusted annual rate of 1.47 million units, up from May's revised annual rate of 1.20 million units, the Commerce Department announced on Friday. The data was significantly better than expected, as economists had forecast a more modest recovery to 1.31 million units.
Meanwhile, housing starts are up 3.5% compared to the same period last year, the report said.
Although construction activity has recovered from May's sharp decline, permit data—a leading indicator—suggests that the recovery could be limited later this year.
The report said that building permits for future homebuilding fell 3% to 1.37 million units last month, which was weaker than expected. According to consensus estimates, economists had forecast permit issuance to remain relatively stable.
The number of building permits issued has fallen 2.4% compared to the same period last year.
The gold market is seeing little reaction to the latest economic data as selling pressure continues after prices failed to hold support at $4,000 on Thursday. Spot gold last traded at $3,966.60 an ounce, down 0.22% on the day.
The U.S. housing market accounts for roughly 16% of the nation's gross domestic product; however, the sector has been struggling due to rising home prices and elevated mortgage rates.
Economists expect the housing market to remain under pressure as persistent inflation has prompted the Federal Reserve to adopt a tightening bias and prioritize price stability. Markets are expecting the U.S. central bank to raise interest rates at least once before the end of the year.
At the same time, subdued construction activity is limiting the inventory of homes available for sale, helping to keep home prices near record highs.
