Inflation Cool, Housing Hot

Gold is still hewing tightly to its range, buffeted by contradictory economic trends born of the uneven, yet persistent U.S. recovery. In fact, it can be safely said that, given the economic troubles in Europe and the credit crunch in China, the U.S. is carrying the world recovery on its back.
 
Inflation for July ran at 0.1% after having risen 0.3% in June. The last twelve months have shown a moderate overall 2% rise in inflation. 
 
"The recent softening in US core consumer prices eases some of the pressure on the Fed to start considering rate hikes, although in our view only temporarily," economist Paul Dales of Capital Economics said in a note to clients.
 
That may be true but there was some strongly contradictory news in the U.S. that was also issued today. 

U.S. housing starts jumped almost 16% in July, a mighty roar from one of the sectors holding back the world's largest economy. Apparently, the building industry in general is feeling good about itself.

A survey showed sentiment among U.S. home builders improved in August (reflecting July events) for a third month. As The Wall Street Journal said, "Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy, generating tax revenue and creating jobs." 

These data reports caused the dollar to rise, affecting gold in the usual reciprocal fashion. So, while in normal trading gold was up a touch over $3.00, due to dollar strength it is, as of 5 PM Eastern Time, down $1.80, a loss of about $4.80 attributable to the greenback's muscle. 

Tomorrow the FOMC minutes from July's meeting will be released. This has some traders on tenterhooks, practically immobilized. On Friday, Chairwoman Janet Yellen will address the Jackson Hole symposium. If traders and investors are looking for signals that will hurt gold (and silver), they best look elsewhere. 

Is it any wonder gold is rangebound?