Ddisappointing economic data supported gold, which is trading near session highs following the National Association of Realtors.
Home sales fell 2.4%, significantly more than expected. Over the year, home sales are down 5.9%, which has created further technical buying momentum for gold. “Rising house prices and sharply rising mortgage rates have reduced buyer activity,” said Lawrence Yun, chief economist at NAR. “It looks like more declines are imminent in the coming months, and we will likely return to pre-pandemic home sales activity after the remarkable uptick of the past two years.”
Spot gold jumped 0.9% on Thursday morning to $1,830.99 as the US dollar fell along with Treasury yields. “The dollar is going down and it’s only natural for gold to go up,” Carlo Alberto De Casa, an external market analyst at Kinesis, told CNBC. “Unless the US dollar continues to tighten and inflation continues to struggle, I see no other reason for further and significant falls in gold.” Casa noted that $1,790 to $1,800 is a key support zone for gold.
Gold had fallen to a four-month low earlier this week amid dollar strength. The yellow metal also came under pressure from the political positions of central banks. Despite the Fed’s hawkish stance, gold’s usefulness as an inflation hedge is very likely to keep it supported. Part of the problem is that many investors, including the founder of HS Dent Harry Tooth, are eager to blame stimulus checks as the cause of inflation. “I think the market has already peaked, January 4 for the S&P 500, and we’re heading down, and the Federal Reserve is going to find out that their something-for-nothing stimulus ultimately didn’t really work, and people will only find out when things fall apart.”
The reality is that the US bailout is just a small piece of a much bigger inflation pie. Studies found that PRA is likely only contribute about 0.3% to inflation in 2021, and less in 2022. The impact will be negligible in 2023.
This means that a host of other factors are having an impact on inflation, which suggests that the Fed will find it more difficult than expected to bring it under control. The war in Ukraine, supply chain issues, and growing demand for raw materials all play a role and won’t be easy. Address.
This is why gold could become increasingly critical as inflation persists. Investors who want exposure to physical gold can access it through the Sprott Physical Gold Trust (PHYS). Gold stocks also sing in times of persistent inflation, so it’s also worth exploring the Sprott Gold Miners ETF (SGDM) or the ETF Sprott Junior Gold Miners (SGDJ).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.