With the US dollar trading lower, this is the next key level for gold, plus consumer confidence, monetary policy and real estate.
Gold
September 29 (King World News) – Ole Hansen, Head of Commodity Strategy at Saxo Bank: Having found support at $1850/oz, gold is now enjoying the dual tailwinds from a weaker US dollar and a second day of falling U.S. real yields. Next level of interest being $1900/oz with Presidential Debate 2020 in focus (see chart below).
Watch Gold To See If It Can Surge Above $1,900
Consumer Confidence
Peter Boockvar: The September Conference Board Consumer Confidence index was much better than expected, rising to 101.8 from 86.3 and 11.8 pts above the estimate.
The Expectations component led the way with a 17.4 m/o/m increase but the Current Situation was higher as well by 12.7 pts. One year inflation expectations remained elevated at 5.7% but that is down one tenth from August. It was 4.5% in March and peaked at 6.6% in June.
There was improvement in the labor market questions as those that said jobs are Plentiful rose 1.5 pts to a 6 month high. The caveat though is at 22.9 it is still well below the March level of 43.3. Those that said jobs were Hard to Get fell 3.6 pts to 20, a 6 month low but was 13.8 in March. Progress but more needed to be made. The overall employment component and income expectations also rose m/o/m. Expectations for better business conditions in the coming 6 months also helped the headline confidence figure.
Spending intentions grew from August but were mixed when looking over the past few months. Auto buying plans rose 1.7 pts m/o/m but after falling by 2.4 pts in August. Plans to buy a home rose .2 pts but after dropping by 1.5 pts last month. Plans to buy a major appliance did rise 4.1 pts to the best since February…
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Bottom line, the gain in confidence is certainly welcome but as seen in the chart, it’s from a level that was near the Covid low and still compares with above 130 in February.
Real Estate
Also reported today was the July (somewhat dated) S&P Corelogic Case Shiller home price index which showed a 4.8% y/o/y increase which is great for those that already own a home and are building equity. It is a challenge though for the 1st time buyer that offsets low mortgage rates as those ever increasing prices are mitigating the benefit of lower monthly payments. It also means more money is needed for a down payment. Expect to see the price increase to be even more aggressive in August.
At some point these higher price points will slow the pace of purchases from 1st time buyers. See in the chart that when home price gains started to accelerate in mid 2017 thru early 2018, pending home sales weakened. They picked up the pace again in 2019 as those price gains slowed, also helped by lower mortgage rates beginning mid year.
Monetary Policy Restrictive, Not Stimulative
Lastly, and to my persistent point that NIRP, ZIRP and QE that eliminates the curve of a yield curve and shrinks net interest margins on loans, read this new piece from the SF Fed, https://www.frbsf.org/economic-research/publications/economic-letter/2020/september/commercial-banks-under-persistent-negative-rates/
Monetary policy that does this is therefore restrictive, not stimulative.
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Mind-Blowing Chart Of The Day!
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