The gold market continues to trade near its session highs, solidly above $4,300 an ounce, and could see further safe-haven demand as the U.S. housing sector remains extremely fragile, with the number of consumers starting the process of buying a new home stalling, according to the latest report from the National Association of Realtors (NAR).
The U.S. Pending Home Sales Index rose 0.3% in August, the NAR announced Thursday. The data were better than expected, as consensus estimates were calling for a 0.2% decline. Meanwhile, July’s contract data were revised down to show a decline of 2.6%, compared with the initial estimate of 2.3%.
For the year, the Pending Home Sales Index fell 4.7%. The U.S. housing market has struggled in recent months as the Federal Reserve has established a new monetary policy tightening bias.
On Wednesday, the Federal Reserve raised interest rates by 25 basis points, and Federal Reserve Chair Kevin Warsh signaled that the central bank still has work to do to bring inflation down to its 2% target.
“Buyers steadily entered into contracts in August even though mortgage rates increased,” said NAR Chief Economist Dr. Lawrence Yun. “However, the housing market is still sluggish, with contract signings below last year. This is due to higher mortgage rates offsetting the increased buying power created by job gains and income growth outpacing home price growth.”
Yun noted that pending home sales are down about 30% from levels seen before the 2020 COVID-19 pandemic.
“Transaction activity peaked in 2021 when mortgage rates fell to near 3%, a historic low, and has not approached that level since,” he said.
The gold market is not seeing a major reaction to the mixed home sales data; however, ongoing weakness in the housing market could continue to weigh on economic activity. Spot gold last traded at $4,374.60 an ounce, up 2.7% on the day.
Economists pay close attention to pending home sales because the report is a leading indicator of existing home sales, given that contracts are signed a few months before homes are actually sold.
Source: Neils Christensen Kitco
