(Kitco News) - The gold market continues to hold around $1,650, seeing little change despite further weakness in the U.S. housing market as rising mortgage rates keep buyers at bay.
The National Association of Realtors (NAR) said on Friday its Pending Home Sales Index, based on signed contracts, dropped 10.2% to 79.5 last month, down from August’s decline of 2.0%. The data significantly missed expectations as economists were looking for a 4.4% drop.
Pending home sales has dropped to the lowest level since March 21.
The gold market is struggling to find any bullish momentum as it trades either side of critical support. December gold futures last traded at $1,650.60 an ounce, down 0.91% on the day.
For the year, pending home sales are down 31%. Weakness in the housing market comes as the Federal Reserve's aggressive monetary policy tightening has pushed mortgage rates to their highest level in 30 years.
"Persistent inflation has proven quite harmful to the housing market," said NAR Chief Economist Lawrence Yun. "The Federal Reserve has had to drastically raise interest rates to quell inflation, which has resulted in far fewer buyers and even fewer sellers."
Yun noted that mortgage rates could remain above 7% for a while, which is significant compared to the 3% rate seen last year.
"On a $300,000 loan, that translates to a typical monthly mortgage payment of nearly $2,000, compared to $1,265 just one year ago – a difference of more than $700 per month. Only when inflation is tamed will mortgage rates retreat and boost home purchasing power for buyers,” he said.
Economists pay close attention to the pending home sales numbers because the index is seen as a forward-looking barometer for the housing market. A lag of a month or two usually exists between a contract and a completed sale.
