US housing data was better than expected
The US released better-than-expected housing (IYR) (VNQ) data for June. US existing home sales rose 3.20% in June to 5.49 million units. This is the fastest pace of sales since February 2007. It was also higher than the market expectations of 5.4 million units.
Another strong indicator is housing starts, as you can see in the above graph. The figures in June also beat expectations. Housing starts rose 9.80% to a seasonally adjusted annual rate of 1.174 million units in June. This is the highest level in almost eight years. This was mainly driven by a strong jump in the multifamily production nationwide. It was up 29.40% to 489,000 units.
Recently, new home sales reached a seven-year peak.
Building permits also rose to multi-year highs. They rose 7.40% to 1.34 million. This indicates strength in the economy. Consumers are investing in big-ticket items like houses.
The US dollar rose against major currencies after strong housing data were released. Stronger housing data also tend to support the view that the US economy is strong enough to withstand a rate hike.
Any data that support the view that the US economy is on a steady path to a rate hike are negative for non-income generating assets including gold. This is negative for gold equities including Goldcorp (GG), Barrick Gold (ABX), Aurico Gold (AUQ), Alamos Gold (AGI), and B2Gold (BTG).
It also affects ETFs like the VanEck Vectors Gold Miners Index ETF (GDX). Goldcorp and Barrick Gold account for 14.30% of GDX’s holdings. The strengthening US economy is also negative for ETFs tracking physical prices like the SPDR Gold Trust (GLD).