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Gold prices have experienced losses today as the Commerce Department’s data on Retail Sales show strong activity, offsetting fears that the economy is slowing down. Core retail sales rose 0.9% in November compared to the 0.4% expected by economists.

Key Takeaways

• Sales excluding automobiles, building materials and food services (core sales) rose by 0.9%. Core sales are seen as less volatile than overall sales and are usually more in line with the consumer spending aspect of GDP.
• Overall sales grew 0.2% due to the sharp decline in the price of gasoline.
• October sales were also revised upwards from 0.3% to 0.7%.
• The data indicates strong consumer spending in Q4. Consumer spending accounts for over two thirds of the US economy, and increased 3.6% annually in Q3.

The recent stock market sell-off and dip in the value of Treasuries had led to concerns of an impending recession, but recent economic data such as the retail sales report and yesterday’s report indicating near-record lows in initial jobless claims made last week have offset these concerns, strengthening the US dollar and making gold a less appealing investment.

GDP estimates for Q4 are now pointing to growth of approximately 2.4% after 3.5% growth in Q3. Overall retail sales grew 0.2% due to the sharp dip in gasoline prices which have dropped around 40 cents a gallon since October. Oil prices have also fallen by a third since the beginning of October with concerns around global economic activity slowing down as well as an oversupplied oil market.

Retail sales increased by 1.1% in October overall, revised up from 0.8%. Sales at service stations posted the biggest drop since May 2017, plunging 2.3% in November after rising 3.2% in October. Auto sales rose 0.2% in November and 1.5% the month before.

U.S. retail sales climb 0.2% in November as holiday shopping season kicks in. Sales an even stronger 0.5% if gas is excluded. Solid report and good sign for 4th-quarter GDP.

— MarketWatch Economy (@MKTWeconomics) December 14, 2018

Building materials store sales dipped 0.3%, clothing stores posted a 0.2% decline after a 1.3% jump in October, and online and mail-order retail sales increased by the most in a year with a 2.3% jump following an increase of 0.8% in October.

Furniture store receipts showed a 1.2% increase with sales at electronics and appliance stores increasing 1.4%. Sales at bars and restaurants dipped 0.5% after a 0.6% increase in October, and spending at hobby, musical instruments, and bookstores rose 0.4%.

Expert Outlook

Katherine Judge, senior economist at CIBC World Markets, said "American shoppers were out in full force in November, with retail sales posting a very strong advance excluding the fall in gasoline prices. This is consistent with the Fed raising interest rates at their meeting next week and we have revised our consumption forecast for Q4 up in line with recent strong indicators of spending growth.”

Market Reaction

Gold prices hit session lows following the retail sales report for November and the upwardly revised data for October, both of which show stronger-than-expected consumer spending activity. Given that consumer spending accounts for two thirds of the entire economy, the report is a significant indicator of economic health and is likely leading traders to favor the greenback over gold for the near term.

Gold is currently trading at $1,235.82/oz with a loss of 0.55%. Gold saw a high of $1,243.34/oz and a low of $1,233.23/oz. With the holiday season approaching and consumer spending on the rise, selling pressure has increased also, boosting the dollar. February gold futures posted greater losses of 0.70% on the day and last traded at $1,238.70/oz.