Back To Basics

The crucial parts remains from the downed Malaysian Airlines flight have been sent on to more respectable homes for analysis, sorting and, sadly, for burial.

The eastern Ukraine returns to its status as an unsettled region ripe for conflict. However, aside from the human and material losses sustained, the biggest loser in this depressing chapter is Vladimir Putin. He has effectively been handcuffed by his own excesses, hoist on his own petard, as the older saying goes.

The result for precious metals is that the markets now must turn to more commonplace factors.

Let's start with housing in the U.S., which, though very positive, is not all unadulterated joy.

Sales of existing US homes in June hit their highest levels in eight months as home price gains slowed to "more welcoming levels," the National Association of Realtors says.

Sales of existing homes, jumped 2.6 per cent to an annual rate of 5.04 million in June, the highest since October 2013, according to the NAR and May sales were revised upward to 4.91 million from 4.89 million.

'This is the third increase in a row, the highest level since October and, combined with the upward revision to May, is very encouraging,' said Jennifer Lee, senior economist at BMO Capital Markets.

Year-over-year, June sales were 2.3 per cent lower, reflecting the housing market's struggle to recover from a long soft patch due to higher mortgage interest rates, a paucity of inventory that pushed prices higher, and erratic unemployment and soft wage growth.

Another dull spot on the shiny report is that new construction is still very sluggish and that helps push prices higher, making housing less affordable, especially to first-time market entrants.

The U.S. inflation report hit 0.3% and is running at an annual rate so far this year of 2.1%. However, for the moment it seems as if the volatile (and rising) cost of fuel is slowing and that will help keep the overall gauge down. The rise in food prices also slowed last month, another sign that inflation has seen the worst for the year.

However, the combination of lowered tensions in Ukraine, a jump in home sales and the frisson of worry that higher inflation brings, caused gold to decline, although it is off its lows. Silver, which has been operating quite independently of gold for the most part, is barely eking out a gain.

As an addendum, the situation in Gaza is still intensifying, but other potentially big players like Egypt are trying to mediate. Iran, in its longer-term quest to reenter the family of nations, is sitting on the sidelines, although it will be held responsible for the great number of rockets sent to Gaza. As we know, Syria is not able to do anything.

Thus, while the situation is not to be taken lightly, it is not having a powerful effect, if any, on gold today.

As always, wishing you good trading,