27 Jul Gold is Up but Affordability is Down
Last week, we talked about the amount of cash different banks are store housing to prepare for the massive amount of loans anticipated to default from now through 2021. As banks face liquidity and default concerns, many consumers have moved their money to precious metals which have been on a tear since mid-June. The weakening US dollar pushed gold prices to a new record this morning of $1,937.60/ troy ounce and silver futures contracts for September have jumped 7.2%. Other non-traditional assets are increasing in value as the dollar falls including Bitcoin which is approaching the $10,000 mark this morning.
The National Association of Home Builders released their report for Q2 of 2020 with some concerning news. They found that affordability is diminishing as only 23% of people in the US can afford to move to a median priced home in their local market. The percent of people is fairy consistent in the different sectors of the US but dives to 21% in the south.
Moderna starts phase 3 of their clinical trials today – the vaccine’s final stage of testing including 30,000 subjects. The final results of the trial could be available by November 2020 according to government health officials.
Stocks are slightly up this morning but down over 1% from their peak last week. We will continue to see volatility as earnings season progresses or an increase if there is an announcement of another round of stimulus checks.
Mortgage bonds are up a little from their dip on Friday. If stocks continue to slip this week, bonds could move up toward the ceiling that they have been testing over the past couple weeks. We hold a locking bias as bonds continue to battle the ceiling.