Gold Price Treading Water As U.S. Housing Starts Drop 14.6% In The Last 12 Months

(December 18, 2024 - Neils Christensen, Kitco)

(Kitco News) - The Federal Reserve’s rate-hiking cycle is not having a significant impact on the U.S. housing sector, as residential construction continues to decline. At the same time, disappointing housing data is having little effect on the gold market.

Housing starts declined by 1.8% in November to a seasonally adjusted annual rate of 1.289 million units, the Commerce Department announced on Wednesday. The data was worse than expected, as economists had forecast a slight increase to 1.35 million units.

For the year, housing construction is down 14.6%.

The weaker-than-expected economic data is not significantly impacting gold, as investors continue to focus on the Federal Reserve’s monetary policy decision, which will be announced later in the afternoon. Spot gold futures last traded at $2,645 an ounce, nearly unchanged on the day.

Although residential construction remains lackluster, the sector could be stabilizing as the number of building permits increased last month.

The report noted that building permits for future homebuilding rose 6.1% in November to a rate of 1.505 million, exceeding the consensus estimate of 1.430 million permits.

Economists are closely monitoring the U.S. housing sector because it has a significant impact on GDP activity. The sector has struggled as consumers have been priced out of the market.

Higher interest rates have driven mortgage rates higher, while low inventories have kept prices elevated.

Some economists expect the housing market to continue struggling. Although the Federal Reserve has begun cutting rates, stubborn inflation could limit the easing cycle in 2025.