Gold price
The price of gold was back on the offensive Wednesday, as investors dissected the latest batch of economic data out of Washington. | Image:

The price of gold rebounded Wednesday after disappointing U.S. retail sales data raised serious doubts about the health of the consumer-driven economy.

Meanwhile, signs of dissent within the Federal Reserve clouded investors’ judgment about the pace and timing of future interest rate cuts.

Gold Rebounds; Silver Follows

Futures on December gold delivery climbed to a session high of $1,495.50 a troy ounce on the Comex division of the New York Mercantile Exchange. The most actively traded futures contract was last up $9.20, or 0.6%, at $1,492.70 an ounce.

Gold price
Gold for December settlement regains its footing on Wednesday. | Chart:

Bullion experienced a violent pullback on Tuesday and eventually fell below $1,480 as demand for precious metals declined. At one point, the contract was on track to re-test last month’s low.

Silver futures also rallied during Wednesday’s session, reaching a high of $17.49 an ounce. Comex silver was last up 4 cents, or 0.2%, at $17.43 an ounce.

Proxy for Consumer Spending Declines in September

U.S. retail sales – a key proxy for consumer spending that drives two-thirds of gross domestic product (GDP) – declined unexpectedly in September, the Department of Commerce reported Wednesday.

Receipts at retail stores fell 0.3% against expectations of a 0.3% increase. The August figure was revised up to reflect a spending increase of 0.6% from 0.4% reported last month.

Excluding automobiles, September receipts fell 0.1%, official data showed.

Retail sales have declined in four of the past 12 months, raising concerns that the consumer-driven economy is beginning to decelerate in the face of a prolonged trade war with China. Although the U.S. economy continues to outperform its global peers, there’s a growing worry that turbulence overseas will make its way to America.

US retail sales
U.S. retail sales have been hit-and-miss over the past 12 months. | Chart:

The Federal Reserve is taking preemptive measures to ensure that doesn’t happen. Central bankers have already cut interest rates twice this year, and many investors believe a third interest rate cut is on its way later this month.

On Wednesday, Chicago Fed President Charles Evans said two downward adjustments to interest rates are enough.

“I think policy probably is in a good place right now. All told, the growth outlook is good, and we have policy accommodation in place to support rising inflation,” he said in a speech in Illinois.

The long-term effects of ultra-low interest rates haven’t been studied thoroughly, but there’s a risk that central bankers are overstimulating a part of the economy that already got its life support following the financial crisis. With consumer debt levels rising, lowering interest rates may not be the silver bullet to revitalize growth.

This article was edited by Josiah Wilmoth.

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