The sale of existing U.S. homes sank 27.2% in July -- the biggest one-month drop ever -- largely because of the phase-out of a federal tax credit. Many buyers took advantage of a temporary tax credit earlier this year to save up to $8,000, but they had to sign contracts before the end of April to qualify.
As a result, sales that might have taken place later in 2010 were squeezed into the first few months of the year. Home purchases were expected to decline after the expiration of the tax credit and that is exactly what's happened. After rising 7.6% in April, existing-home sales fell 2.2% in May and 7.1% in June.
"The July plunge in resales is absolutely the hangover effect from the expiration of the tax credit. Home sales are likely to remain sluggish over the next few months despite the lowest 30-year fixed-mortgage rates in the modern era. Rates slipped to a record-low 4.56% in July from 4.74% in June, according to Freddie Mac.
Gold remained in the negative territory before the homes sale report released, pressured by the firming dollar and fading safe- haven demand.
The disappointing home sales data triggered turnaround in gold price early in the session, as investors flocked to the precious metal to protect their wealth, and the reversal in dollar also enhanced gold's appeal as an alternative investment. COMEX
Gold rose $25 at COMEX and ` 200 at MCX after disappointing data. Crude oil and base metals slumped with the front-month WTI contract slide -2.5% to close at 71.63 and the LME metal index, a normalized average of future prices for the 6 metals (Aluminum, Copper, Nickel, Zinc, Tin and Lead) over 3 maturities, lost -1.5%.
