New housing starts and permits couldn’t shake worries about the economic slowdown.
While Gold is trying to hold it against the past weeks, we have mixed data and signals that can increase the doubts for yellow metal investors. On the other time, mixed data and outlooks made US Dollars fall lower and stop the gold bears to fall lower than their one-week low.
Despite softer CPI numbers that helped the stock markets and eased the worries about higher inflation numbers, FED officials stressed that it is too soon to declare a victory on inflation and have maintained a hawkish tone. At the same time, the unexpected slump in the Empire State Manufacturing Index to -31.3 in August from 11.1 in the previous month and mixed house market numbers increased the recession fears and raised this US dollar demand.
So, when the USD started to increase, and at the same time FED's hawkish tone elevated US Treasury bond yields, gold started to get pressured.
Wednesday's published data from the US housing market also showed that even higher mortgage rates could not cool down the housing markets and with higher rent prices, developers are still encouraged to continue their projects with more pace than market expectations. However, the important point to watch as other data is that numbers show the slowdown and we should not forget that.
Total housing starts fell 9.6% in July and 8.1% annually. Despite this fall, July's pace is still stronger than the pace averaged in 2019 before the pandemic starts.
Looking at more detailed numbers shows that developers have difficulty digesting higher mortgage rates and market demand with a possible recession ahead. The NAHB Housing Market Index published on Tuesday, fell to 49 in August, the lowest level since May 2020, when the pandemic brought activity to a virtual standstill.
On top of them, on Wednesday we also had the retail earnings. Released earnings from Walmart and Home Depot both were better than expectations and helped the stock markets to have a better feeling and increase more. At the time of writing, the Dow Jones Industrial Average rose 8%, and the S&P 500 gained 0.3%, but NASDAQ Composite dipped 0.1%.
Again we can see the contradiction can be seen in more detailed data. The main driver of retail sales were the cheaper products and the fear of raising prices, not because of consumer confidence. These detailed numbers again can increase the concerns and doubts about the recession.
Later this week we will have more data from the housing market. So far, in one sentence, we can say that amid a cooling off of the real estate and home building sector, housing starts in July fell to 1.45 million annually, and the drop was more than expected at the slowest pace since last year.
In reaction, US bond Yields increased. 10-year treasury yields were last seen at 2.84%, and gold continued to decline. While from the fundamental point of view yellow metal is under pressure, technically also it remains bearish. 100-DM at 1,834 is the key resistance and gold for higher prices first needs to breathe above this level. The stochastic main line breaches the signal line for the second time and confirms the bearish trend in the daily chart, but it is not a strong signal.
