(Kitco News) - The gold market is holding on to gains above $1,300 an ounce, trading near a seven month high as pessimism grows among U.S. consumers.

Tuesday, the U.S. Conference Board, said that is Consumer Confidence Index fell to a reading of 120.2, down from December’s reading of 128.1 and missing expectations. According to consensus forecasts, economists were expecting a reading around 1250.

This is the second month consumer confidence has dropped as consumer continue to worry about future economic conditions. The report said that the expectations index dropped sharply to 87.3, down from December's reading of 99.1. The Present Situation Index dropped to a reading of 169.6, down from the previous reading of 169.9.

The gold market is seeing little reaction to the weaker-than-expected data. February gold futures last traded at $1,307.10 an ounce, up 0.31% on the day.

"The Present Situation Index was virtually unchanged, suggesting economic conditions remain favorable. Expectations, however, declined sharply as financial market volatility and the government shutdown appear to have impacted consumers," said Lynn Franco, senior director of economic indicators at The Conference Board."Shock events such as government shutdowns tend to have sharp, but temporary, impacts on consumer confidence. Thus, it appears that this month’s decline is more the result of a temporary shock than a precursor to a significant slowdown in the coming months."

Economists pay close attention to consumer confidence data as it could have an impact on consumer spending. People tend to spend more when they are optimistic about the economy and the labor market.

Katherine Judge senior economist at CIBC World Markets, said that it’s not surprising consumer confidence fell in January as the U.S. government saw its longest partial shutdown in history. However, she added that despite the weak headline data, the bank still sees a relatively healthy consumer.

“Overall, we still think that consumer spending will remain an important source of growth for the US economy, as the headline confidence series is not strongly correlated with household spending,” she said.