Gold Prices Near $1,400 Following Weak US Home Sales Data

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By m rochan | August 24, 2013 8:49 PM EST

India's gold jewellery exports plunge by 70% in July due to a shortage of raw material.

Gold prices ended higher this week after weak US home sales data restored hopes that the Federal Reserve could maintain the current pace of its asset buys.

Spot gold hovered around $1,396.56 (£896.78, €1043.69) an ounce at 2:15 pm on 23 August, and gained 1.6% in the week ending 24 August. It struck a two-and-half-month high of $1,398.20 in intra-day trading.

US gold futures for December delivery settled at $1,395.80 an ounce, preliminary Reuters data showed.

US economic data showed that Americans bought fewer homes in July compared to June. Sales of newly built homes dropped 13.4% to 394,000 units, compared with 455,000 units in June. The July figure is the lowest for nine months.

Axel Merk, portfolio manager of Merk Funds told Reuters: "The fear is clearly that higher interest rates (are) going to topple (the) housing recovery, which means the Fed has to ease and not tighten." Merk Funds holds close to $500m in currency mutual-fund assets. The Fed's FOMC is due to meet on 17 September, 29 October and 17 December.

India's Jewellery Exports Plunge

Meanwhile, exports of gold jewellery from India, the leading buyer of the precious metal, dropped 70% in July owing to a shortage of raw material.

Gold jewellery exports dropped to $441.4m (£283.4, €329.8) in July from $1.5bn (£963m, €1.1bn) a year ago, according to India's Gems and Jewellery Export Promotion Council (GJEPC).

India has imposed restrictions on gold imports and hiked the duty on gold three times this year to narrow its widening trade deficit.

Gold prices ended higher last week. The yellow metal's allure as an investment hedge increased after downbeat US economic data poured cold water on hopes of a quick economic recovery.

Economic data from the US showed that consumer confidence dropped in August and that retail sales growth remained unchanged from July. In addition, US residential construction growth missed expectations in July.

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