Gold rises as home sales fall: Analyst sees upward momentum to $1,450
New-home sales dropped 1.5% in March for its third straight monthly decline, with activity in the West plunging 23.6% on a month-over-month basis. This follows last weeks disappointing data on March housing starts and permits.
Industrial metals were hit this morning on news that home sales were weaker than expected, RJO Futures strategist Phil Streible told Bloomberg. This could have a further effect on the economy, dragging down the chances for a rate hike in June, and investors are seeking some of the safe-haven assets like gold and silver.
All eyes on Fed, GDP this week: Meanwhile, the Dallas Feds manufacturing-activity report contracted for the 16th straight month, thanks to the ongoing oil slump. It is a bad time for manufacturing, agriculture and mining the only sectors that actually create wealth, one respondent lamented.
The news bodes ill for U.S. GDP estimates, which the Atlanta Fed has pegged at a meager 0.3% as of April 19 (an update is set for Tuesday, April 26). An official GDP update from the Commerce Department is due on Thursday. The Fed also starts its two-day meeting Tuesday and will issue its latest rate-hike decision Wednesday, but Wall Street currently puts the odds of an interest-rate increase at virtually nil.
All the major stock indexes were in the red Monday, while gold was on the move higher, advancing almost 1% and topping the $1,240 level at the peak of its session, thanks to newfound weakness in the U.S. dollar. Silver also rose about 0.5% to touch $17.04.
New wave of buying at $1,275: Bulls continue to like golds prospects despite its relatively rangebound trading level since February. For Orips Research CEO Zev Spiro, thats pure consolidation.
As long as prices hold above support in the $1,190-$1,205 area, then the composure remains positive, Spiro told CNBC. Upward momentum is expected with a breakout above the $1,275-$1,280 area. So, thats where I expect the new wave of buying would come in and could carry prices higher. Predicting a total $200 move this year, he added, $1,450 is my objective. Once we get a break above the $1,280 area, I suspect there will be a fast directional move higher.
And MarketWatch columnist Michael Brush interviewed some analysts who also think golds 2016 streak will stay intact. I would not be surprised to see all-time highs in this next leg of the precious-metals cycle, Tocqueville Gold Fund exec John Hathaway said. Theres a war on cash and a war on savings, and people are starting to see that. All of this drives people to think: What else is there? Where else can I keep my money safe?
Silver to $20-$25, expert says: Silvers fortunes also look bright, according to CPM Group chief Jeffrey Christian. A few years from now youre probably going to see it over $20, Christian said, admitting that he underestimated its performance this year. I think that we could see silver trading in the $20 to $25 range within a few years.
Silver already has a strong fan base, judging from the U.S. Mints sales of its 2016 silver American Eagle coins. As of last Friday, those sales are running at a record clip, with more that 17.912 million ounces sold. Thats 27.9% higher than at the same time last year. And on the gold front, 37,000 ounces of gold American Eagles and gold American Buffalos combined were sold last week the most since sales of 98,500 ounces in the week of Jan. 11 when the newly 2016-dated editions launched, CoinNews reported.
Coin sales could leap further after the Fed issues its post-meeting statement Wednesday, provided that its message sounds cautious about the state of the U.S. and global economies. Another major central bank, the Bank of Japan, is due to meet Thursday, and bankers everywhere will be watching closely, given the negative interest rates and massive quantitative-easing programs the BOJ has launched with little effect on the nations moribund economy.