(Kitco News) - The gold market is struggling below another key support level and could see further selling pressure as the U.S. housing market sees a modest improvement as more consumers start the process of buying a new home, according to the latest data from the National Association of Realtors (NAR).
The U.S. pending home sales index rose 1.4% in April, the NAR announced on Tuesday. The data was better than forecasts, as economists expected only a 1.0% rise.
In the last 12 months pending home sales increased 3.2%, the report said.
“Buyers are coming out with cautious optimism despite increasing economic uncertainty and a slight rise in mortgage rates,” said NAR Chief Economist Dr. Lawrence Yun. “Demand will easily be even higher once mortgage rates retreat to the levels they were at earlier this year.”
The gold market is not seeing any major reaction to the latest housing market data as prices have pushed below $4,500 an ounce. Spot gold last traded at $4,495.30 an ounce, down more than 1% on the day.
The gold market continues to struggle as the war in Iran continues to support higher oil prices, which in turn are driving inflation fears and higher interest rate expectations.
According to some analysts, gold could also struggle as the better-than-expected housing market data supports expectations that the U.S. economy can avoid a recession.
Although the latest housing data reduces some economic fears, economists note that the housing market continues to face growing headwinds as rising oil prices are driving inflation pressures higher, which in turn is forcing markets to price in potential rate hikes before the end of the year.
Markets see a more than 50% chance of a rate hike by December.
Along with potentially higher mortgage rates, Yun said that supply needs to increase.
“Historically low foreclosure sales imply minimal price discounts, with a majority of markets selling at a higher price from a year ago,” Yun said. “Unless supply meaningfully increases, home price growth could outpace wage growth and further erode the homeownership rate. All efforts need to be focused on boosting housing supply.”
