Gold is showing little movement in the Wednesday session. In the North American session, spot gold is trading at $1241.66. On the release front, Building Permits climbed to 1.25 million, beating the estimate of 1.20 million. Housing Starts improved to 1.22 million, above the forecast of 1.16 million.
US housing numbers have been mixed in recent months, but Tuesday’s releases pointed to a strengthening housing sector. Building Permits improved to 1.25 million in June, up from 1.17 million a month earlier. Housing Starts jumped to 1.22 million, up sharply from 1.09 in the May report. The solid numbers will give a boost to second quarter numbers. US Advance GDP will be released next week, and the markets don’t want to see a repeat of the first quarter reading, which missed expectations with a gain of just 0.7%.
Gold has been moving higher, gaining 2.1% since Friday. The metal moved higher after CPI and retail sales disappointed, and the rally has continued this week. The dollar lost ground after President Trump suffered a major defeat on Capitol Hill on Tuesday, and gold responded with gains of 0.08%. Political risk in the US has reduced investor appetite for risk and boosted gold prices.
President Trump hasn’t done very well at learning how to tango with Congress, and this week’s debacle on Capitol Hill could make the gap between Trump and Republican lawmakers even harder to bridge. Trump had vowed to replace Obamacare, but his health care bill has stalled in the Senate before lawmakers even had a chance to vote on the proposal. With some conservative Republicans coming out against the bill, it’s questionable if the Republicans can pass another version before Congress takes a recess in August. Trump had promised to pass a health care before the summer break, so his credibility will take another hit if he’s unable to do so. Trump has been in office for six months, but has been unable to get Congress to pass any significant bills, even though the Republicans enjoy a majority in both houses of Congress. With this latest setback, there is growing skepticism as to whether Trump will be able to convince Congress to pass other key parts of his agenda – tax reform and fiscal spending. This paralysis on Capitol Hill has deepened investor pessimism about Trump’s legislative agenda and is weighing on the US dollar.
