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Gold Prices Ignore Positive U.S. Housing Data As Markets Remain Focused On Fed

Kitco News

housing starts

(Kitco News) - The release of the U.S. housing data from November had little impact on gold prices, with the metal holding on to the $1,250 mark as markets await the Federal Reserve's rate decision scheduled for Wednesday.

U.S. housing starts rose 3.2% to a seasonally adjusted annual rate of 1.256 million units in November, the Commerce Department said on Tuesday. Consensus forecasts compiled by most news organizations called for starts to be around 1.225 million.

October’s data was downwardly revised to 1.217 million units. But, for the year, housing starts declined 3.6% from the November 2017 levels.

At the same time, building permits data, which is a precursor to future projects, climbed 5% in November to 1.328 million from October’s 1.265 million. For the year, building permits edged up 0.4% from the November 2017 levels.

Following the release, gold prices did not sway in either direction. The February Comex gold futures were last trading at $1,251.40, down 0.03% on the day.

Digesting the data, economists said that the pickup in the housing market in November was not without its caveats.

“[Housing starts gains] came atop of a downwardly-revised October reading … The entire gain was accounted for by the volatile multi-family segment which contributes less to GDP on a per-unit basis than the single-family segment. The pace of single-family homebuilding has retreated for three consecutive months, and flat permit issuance in November after a contraction in the prior month doesn't bode well for that segment's trajectory,” said CIBC Capital Markets economist Katherine Judge.

Same thing was noticed in the building permits data as well, Judge added.

“Overall, even with the upside surprise in both starts and permits, the fact that they were driven by multiples should limit market reaction,” she said.

Also, lack of movement in gold on Tuesday could be attributed to the market waiting for the release of the Federal Reserve’s interest rate announcement, which is scheduled for Wednesday.

“The U.S. Federal Reserve’s Open Market Committee (FOMC) meets Tuesday and Wednesday to discuss monetary policy, while the U.S. government could be shut down at the end of the week if Congress and President Trump cannot agree on a budget plan. Most expect the FOMC to raise interest rates by 0.25% on Wednesday afternoon, at the conclusion of their meeting,” said Kitco’s senior technical analyst Jim Wyckoff.

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