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(Kitco News) – The gold market continues to see strong bullish momentum as construction in the U.S. housing market slowed in April.
Tuesday, the Commerce Department said housing starts decreased 9.5% to a seasonally adjusted annual rate of 1.569 million units last month. The data was weaker than expected as consensus forecasts were calling for a rate of 1.71 million units.
For the year, housing construction is up 67.3% compared to the activity reported in April 2020. However, last year the nation implemented strict lockdown measures due to the COVID-19 pandemic.
At the same time, building permits data, which is a precursor to future projects, was 0.3% at 1.76 million in April, relatively in line with expectations. For the year, building permits are up more than 60% from the April 2019 levels.
The gold market is holding on to significant gains after breaking above $1,850 an ounce at the start of the week; however, the precious metal is seeing little reaction to the weaker than expected housing data. June gold futures last traded at $1,875 an ounce, up 0.40% on the day.
According to some economists housing construction is suffering as lumber prices continue their historic climb to record highs. Last month the U.S. Homebuilders Association noted that in the past year lumber prices have skyrocketed more than 300%. The association added that increased costs have pushed home prices up by $36,000.
The weak construction data comes as the U.S. housing market continues to play an important role in economic activity. This past year the housing sector was a significant pillar of strength for the economy.
Andrew Grantham, senior economist at CIBC, said that the drop in construction activity is a sign that the sector is impacted by material and labor shortages. However, he added that there stable building permits is a sign that activity could pick up later in the year.
“the fact that building permit applications held broadly stable from the prior month at a 1760K pace is a signal that the desire to build is still strong, but that material and labour constraints are holding some companies back,” he said.
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