Gold retained overnight gains on Wednesday as worse-than-expected US housing data hit the US Dollar and supported the Fed's cautious approach to interest rate hikes. US housing starts declined more than expected in March, while permits for future home construction slipped to a one-year low, indicating some cooling in the housing market in line with signs of a steep slowdown in economic activity in the first quarter.
US housing starts declined more than expected in March, while permits for future home construction slipped to a one-year low, indicating some cooling in the housing market in line with signs of a steep slowdown in economic activity in the first quarter. Housing starts plunged 8.8% from a month earlier to a seasonally adjusted annual rate of 1.089 million in March, according to the Commerce Department. At the same time, new applications for building permits, a bellwether for forthcoming construction, dropped 7.7% to 1.086 million, from a revised February rate of 1.177 million. Demand for housing has been robust over the past year, with home prices up in many markets amid a shortage of inventory. Buyers could turn to new homes, which only account for about 10% of the overall housing market, as the supply of existing homes declines. Economists say the fragile economy, combined with low inflation justifies the Fed's cautious approach to hiking interest rates. The economy has been hit by a strong US Dollar and sluggish global demand, which have weighed on exports. Lower oil prices are also a drag as they have undercut profits of energy firms, prompting them to sharply curb spending on capital projects. First-quarter gross domestic product growth estimates are currently as low as a 0.2% annualized rate. The world's number one economy expanded at a 1.4% rate in the December quarter.
While delivering a speech on the world's economy, Reserve Bank of Australia Governor Glenn Stevens said governments should rely more on infrastructure projects rather than dropping "helicopter money" into individuals' bank accounts in order to underpin growth and inflation. The Governor said that policy makers need to look for tools other than low interest rates to boost economic growth. After the financial crisis in 2008, central banks lowered their policy rates dramatically, with many reaching zero bound. Stevens said it was evident that monetary policy has been unable to stimulate the desired speed of economic growth. The actions taken by central banks were effective during the crisis, Stevens admitted. However, policy was "always going to have limited capacity to accelerate the recovery". Regarding the prospects for future growth, Governor Stevens said he believed it was "a bit too pessimistic" to say the world had entered a stage of "secular stagnation", where the desire to save is increasing, while opportunities for profitable investment are weak, as recently suggested by former US Treasury Secretary Lawrence Summers.
Upcoming fundamentals: Big day for UK statistics, BOE's McCafferty speaks
Gold confirms 1,241 from second attempt
The bullion grabbed benefits from weaker US Dollar on Tuesday, by soaring the most in a week to close at 1,250. Backed by the 55-day SMA, currently at 1,231.56, gold surged as high as the first weekly resistance at 1,256.06, which managed to contain the upward pressure. Now the spot is located above the monthly pivot (1,241.50) and the outlook is improving. The key bullish goal is present April peak at 1,262.70, which is immediately followed by the February high at 1,263.43. Also, the bullish case is expected by the aggregate daily technical studies.Long/short distribution is back to 40/60
Spreads (avg,pip) / Trading volume / Volatility
Market participants foresee the price of gold at 1,275 by the end of July
Traders who were asked regarding their longer-term views on gold between March 20 and April 20 expect, on average, to see the metal around 1,275 by the end of July. Generally, 63% (-2%) of participants believe the price will be above 1,250 in ninety days. Alongside, 22% of those surveyed reckon the price will trade in the range between 1,100 and 1,250 over the next three months.