Gold Prices Rebound but Momentum Remains Negative

Gold prices rebounded from session lows consolidate the most recent loses experienced on Tuesday. Resistance is seen near an upward sloping trend line that comes in near 1,308, which coincides with the 10-day moving average. Support on the yellow metal is seen near the December lows at 1,240. Momentum remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices. Softer than expected jobless claims allowed rates to ease, paving the way for a bounce in gold prices.

Initial claims bounced

Initial claims bounced 11k to a still-lean 222k in the BLS survey week from 211k in each of the prior two weeks and a 48-year low of 209k in the third week of April. Claims have tightened sharply into May despite today’s rise, after a bounce to a 242k recent peak in late-March that was attributed to seasonal adjustment difficulties with the moving Easter holiday. Claims are averaging just 217k thus far in May and we assume a 219k cycle-low final average, versus a prior cycle-low average in April of 221k, and 228k in March, and 224k in February. The 222k May BLS survey week reading lies mostly below recent survey week readings of 233k in April, 227k in March, and 218k in February. Continuing claims fell 87K to a remarkably tight 1,707k new cycle-low in the first week of May, just as the insured jobless rate dropped back to the 1.2% cycle-low from 1.3% last week but the same 1.2% in the prior week, as that measure is ratcheting below the narrow 1.3%-1.4% range since last March.

U.S. MBA mortgage market index sank

U.S. MBA mortgage market index sank 2.7% along with a a 2.1% decline in the purchase index and a 3.8% drop in the refinancing index for the week ended May 11. The average 30-year fixed mortgage rate sank 1 basis point to 4.77%, but remains elevated and will be up sharply by about 10 basis points for this week’s data. Refinancing applications hit the lowest level since August of 2008, as rates pushed the envelope to 4.5-year highs.

Eurozone March construction output dropped

Eurozone March construction output dropped -0.3% month over month, after already falling -0.7% month over month in both February and January. A very bad quarter for construction, which was of course already reflected in the marked slowdown in overall GDP growth in Q1 and is partly due to the adverse weather conditions and the unusually high number of sick days over the first months of the year.