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Data earlier showed sales of new single-family homes plummeted in March, hitting their slowest pace since July. Sales plunged 14.5% to a seasonally adjusted annual rate of 384,000, dropping in three of the four U.S. regions, and well below analysts’ expectations for a March sales pace of 450,000.
“Up until today’s report, new home sales had been reasonably stable for six months following a soft patch last summer,” said Joshua Shapiro, chief U.S. economist for MFR to Marketwatch. “With that said, data from the Mortgage Bankers Association show that mortgage applications for home purchase remain lower, suggesting that higher interest rates and earlier price increases are having an impact on individual demand for homes, and also highlighting the fact that speculative demand continues to be the main driver of growth in the existing home market.”
Gold rose in the wake of the report as U.S. stocks fell into negative territory. The data followed Tuesday’s report showing U.S. house prices rose just 6.9% in the 12 months through February, their smallest gain in a year.
Still, convictions that the Federal Reserve will continue tapering the pace of its monthly asset purchase program remain firm, although further signs of a slowdown in U.S. economic growth will likely prompt a change in analysts’ projections, which will certainly benefit precious metals’ values.
Elsewhere, geopolitical tensions are once again providing support for gold prices, as tensions escalate amid reports that Ukraine is renewing its push to dislodge militants in defiance of Russia’s warnings of sparking a civil war.
Last week, Ukraine’s government pledged to abide by the deal negotiated in Geneva by Ukraine, the European Union, the U.S. and Russia; however hopes for a resolution have faded since Ukraine accused pro-Russian separatists of torturing and killing two people and shooting at one of its military planes.
The Pentagon has announced the deployment of hundreds of U.S. troops to Eastern Europe through year-end to reassure allies on Russia’s borders amid flaring tensions between Kiev and Moscow.
Despite Wednesday’s rebound in bullion prices, gold still faces pressure from concerns over waning physical demand in Asia, as well as data this week showing continued outflows from gold ETFs.
Demand has been quiet in China as a weaker Yuan made dollar-denominated gold less affordable.
Meanwhile, sharp outflows from the SPDR gold trust in recent days have fueled concerns of falling investment demand. Last week, the fund's outflows totaled 9.3 metric tons, erasing all of 2014 gains.
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