(Kitco News) - The gold market continues to struggle to attract any safe-haven demand, even as the U.S. housing market continues to lose significant momentum, with the number of Americans planning to buy a home dropping sharply in September.
The U.S. pending home sales index dropped 7.3 in last month, the NAR announced on Tuesday. The data was significantly worse than forecasts, as economists expected only a 0.6% decline.
The NAR said that weakness in the housing sector is broad-based, with all regions reporting monthly and annual declines.
“Market conditions weakened in September due to fast-rising mortgage rates,” said NAR Chief Economist Dr. Lawrence Yun. “Although job growth and income gains can support home purchases, housing affordability is more affected by changes in mortgage rates.”
The gold market is not seeing any significant moves in its reaction to the disappointing housing market data. The precious metal continues to struggle in the face of persistent inflation pressures and elevated bond yields.
Spot gold last traded at $4,156.50 an ounce, relatively unchanged on the day.
The Federal Reserve has been forced to adopt a new tightening policy as the war in Iran has driven energy prices higher, which is lifting inflation pressures up. Although markets are not expecting the central bank to raise interest rates next week, they are pricing in more tightening in December and through the start of the new year.
Despite the headwinds, Yun said he remains optimistic that the housing market can turn around if interest rates stabilize.
“Given that mortgage rates have already risen much more than the Federal Reserve’s short-term interest rate hikes, mortgage rates could be topping out. Despite the difficulty of obtaining a mortgage, the limited number of distressed properties is ensuring steady home prices. Buyers and sellers may simply be holding back until mortgage rates move favorably,” he said.
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.
