Gold prices continue to hold steady near recent record highs, trading above $2,580 an ounce, even as the U.S. housing market reports a significant uptick in construction activity.
The Commerce Department revealed on Wednesday that housing starts surged by 9.6%, reaching a seasonally adjusted annual rate of 1.356 million units. This figure exceeded economists’ expectations, who had forecast a smaller increase to 1.31 million units. Additionally, the July figure was revised down to 1.237 million units. Compared to August 2023, housing starts have increased by 3.9%.
This growth represents the fastest pace of construction activity since April. Despite the robust rise, some analysts suggest that the current pace still falls short of meeting the surging demand in the housing market.
The report also highlighted a 4.9% increase in building permits for future construction, bringing the rate to 1.475 million last month. This surpasses the anticipated 1.41 million permits. On an annual basis, however, the issuance of building permits has declined by 6.5%.
Despite the strong housing data, which is expected to bolster economic activity in the latter half of the year, gold prices have remained relatively stable. As of the latest trading, spot gold was priced at $2,573.90 an ounce, reflecting a modest daily increase of 0.19%.
Gold remains well-supported amid expectations that the Federal Reserve will enact a substantial interest rate cut later today. According to the CME FedWatch Tool, there is a 63% probability of a 50-basis-point reduction.
Nevertheless, some economists warn that market expectations might be overly optimistic. They point out that despite the robust housing figures, the broader U.S. economy is still showing signs of a general slowdown.
The U.S. housing market has faced heightened scrutiny in recent years due to the Federal Reserve’s tightening cycle, which has driven mortgage rates to their highest levels in decades. Concurrently, a lack of new supply and increased construction costs have pushed home prices higher, posing challenges for first-time homebuyers attempting to enter the market.
