Gold Dips Below $2,500 As US Services and Home Sales Improve

Gold printed a new record high at $2,531 earlier this week, but it has been retreating since then and today it dived $40 lower after upbeat US data. Home sales showed an increase, countering the declining trend of the previous months, while Services PMI jumped above 55 points, indicating a decent level of expansion in this sector. The  US dollar rose on these numbers, which is sending other assets lower, such as Gold (XA), which dived to $2,470.

Gold Chart H4 – Will the 50 SMA Hold As Support?

US July existing home sales data for July 2024

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  • US July existing home sales 3.95m vs 3.93m expected
  • Previous sales were 3.93 million units.
  • Sales increased by 1.3% (vs. -5.4% prior), breaking a four-month losing streak.
  • Sales down 2.5% year-over-year.
  • Inventory at 4.0 months (vs. 4.1 months prior).
  • Median home prices at $422,600 (vs. $426,900 prior).
  • Prices up 4.2% year-over-year.
  • Supply increased by 18% year-over-year.
  • Full report

“Despite the modest gain, home sales are still sluggish,” said NAR Chief Economist Lawrence Yun. “But consumers are definitely seeing more choices, and affordability is improving due to lower interest rates.”

The August 2024 PMI surveys from S&P Global

  • Services PMI: 55.2 points (vs. 54.0 points expected; prior was 55.0 points).
  • Manufacturing PMI: 48.0 points (vs. 49.6 points expected; prior was 49.6 points).
  • Composite PMI: 54.1 points (vs. 53.5 points expected; prior was 54.3 points).
  • Improved service sector confidence offset by a weaker manufacturing outlook.
  • Employment fell in August, marking the first decline in three months.

S&P Global Market Intelligence Comments on the Data:

“The strong growth in August suggests that GDP growth in the third quarter could exceed 2% annualized, which should ease immediate concerns about a recession. Additionally, the decline in selling price inflation to near pre-pandemic levels indicates a ‘normalization’ of inflation and strengthens the case for lower interest rates.

However, the ‘soft-landing’ scenario is less convincing when looking beyond the headline figures. Economic growth is becoming increasingly reliant on the service sector, while manufacturing, which typically leads the economic cycle, is in decline. The forward-looking orders-to-inventory ratio in the manufacturing sector has dropped to one of the lowest levels since the global financial crisis.

Meanwhile, the growth in the service sector is being limited by hiring challenges, which continue to drive up wage rates and keep overall input cost inflation high by historical standards. This complex situation explains why policymakers are cautious about cutting interest rates. Nevertheless, the survey’s key takeaways are that inflation is gradually returning to normal levels, and the economy faces the risk of slowing down due to imbalances.”

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Skerdian Meta
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Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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