Good morning. This is a precious metals update post the housing data today. The price action is very significant and as a result, it warranted a communication..
First off, post this morning‘s podcast, which discussed and prepped for this possibility, housing starts came in abysmally low compared to what was expected.
U.S HOUSING STARTS (MOM) (JUL) ACTUAL: -6.8% VS 3.0% PREVIOUS; EST -1.5%
U.S BUILDING PERMITS (MOM) (JUL) ACTUAL: -4.0% VS 3.9% PREVIOUS; EST -2.0%
This bodes well for a fed rate cut due to domestic economic weakness.
Recession All But Assured
The reason housing starts are so important is that historically almost every recession starts with housing values dropping. Peoples houses, dropping value, less houses are started in new construction as we see today, people feel less “wealthy“, And workers get laid off almost immediately on the construction side.
Oppenheimer says:
"There are now 476,000 new homes for sale in the US, the highest inventory since February 2008."
And with the median price of new housing finally going below the median price of existing housing, people will get fired.
The wealth effect will start to kick in in reverse now.
It’s not unreasonable to believe from this data point, any doubt you have about us being in a recession should be erased.
Markets react:
As of this writing, the dollar is down about 25 basis points, nothing large, but after the last couple days pretty significant and that it’s undone the whole rally that it had after the retail data point spike.
Stocks are almost perfectly unchanged. This is particularly troubling if you’re person who is owning stocks with the anticipation of cuts as being bullish for them.
Bonds are mixed but slightly higher. When we get to precious metals, it gets much more interesting.
Spot gold traded over $2500 this morning. It has never traded that price ever before.
Benoit is busy
Notably the head of the gold trading desk at the bank of international settlements, Benoit Gilson, has been a little bit active this morning after the number He is likely keeping a lid on the euphoria.
Silver on the other hand while it did rally after the data, is essentially unchanged on the day. Considering yesterday’s rally outpaced gold’s price action then, this is not a concern.
Oil also had an interesting move this morning. Coming into the number oil was down significantly. On the data point release it rallied somewhat. But in the last 20 minutes or so it has started to drop back towards its Lows. It would seem oil is not really data driven right now and is currently weighed down by its own fundamentals
Momentum and Targets
Now that we’ve seemingly breached Michael Oliver‘s momentum level in gold it’s not unreasonable to think $2700 will be the next target. That’s something we would think if it were to happen it could happen by the end of January.
What we’re going to focus on right now is the following: if the bank of international settlements is again active today keeping a lid on gold, we want to see who the buyer is underneath. Right now the leaning candidates are: a sovereign wealth fund, BRICS Central banks, and at number three (but rising), Bullion Banks, who may be short physical metal and unable to deliver.
Michael Oliver’s Price levels and our “prediction”
On the housing front, my guess is the existing home sellers are lagging here and will start to drop their prices and this becomes somewhat of a staircase down in housing until we get a floor in rates. In other words, they have not yet recognized the top is in and they missed their chance to sell into the sellers market. Would love to hear your thoughts Vince.
Good analysis. I love seeing Au close decisively over $2500-even if it probably gets smashed down on Sunday night. Higher lows. . . .
Thanks. The dips oil come. They always do…
As of 12 pst, oil stayed weak, but silver up over 1%.
Spot Gold over 2500!
Wow.
Congratulations on the target being met
:)
On the housing front, my guess is the existing home sellers are lagging here and will start to drop their prices and this becomes somewhat of a staircase down in housing until we get a floor in rates. In other words, they have not yet recognized the top is in and they missed their chance to sell into the sellers market. Would love to hear your thoughts Vince.
That completely makes sense my pal on the high-end housing market says that’s how it happens.
Great analysis, Vince - cheers to $2500
SILVER RED ALERT! Massive 2024 Solar Installs Hidden AGAIN from Silver Investors!! (Bix Weir)
https://youtu.be/G1U24YasdEY