The USD is finally gaining ground as indices pullback with markets drawing closer to the final week of the month and a long weekend in the US and UK, says Adam Button of

A surprise plunge in US new home sales in May isn't all that it seems. NZD is the only currency gaining vs. USD after a relatively hawkish RBNZ policy statement. New data showed that May US new home sales sank to a pace of 863K from 1021K the month before. That's one of the sharpest drops in record and a sharp correction after a surge since the pandemic. Cardano was up 13% on the day, continuing to perform all major cryptos.

Gold hit 1912, rising more than $70. Despite the long weekend ahead, there will be a round of crucial US macro data, which could trigger a spike in yields. 

Demand Tapped out? - Gold Real Yields May 26 2021 (Chart 1)

Where the US housing market goes will be a critical input for US growth this year and beyond. Americans are famous for taking home equity loans and the construction sector can be a major tailwind.

So, is demand tapped out? No.

Price is the ultimate measure of demand, and the median new home sales price was up 20.1% y/y. More telling may be a long series of anecdotal reports from home builders who are struggling with supply bottlenecks and unexpected commodity price increases.

Typically, new homes are sold on spec at agreed-on prices one-two years before the final product is delivered. That leaves builders with all the exposure to commodity prices—namely lumber. Since prices have been flat for much of the past decade, that's usually something that can be absorbed into margins. This year though prices of lumber have quadrupled and that's left homebuilders in a bad spot.

Rather than doubling down, trying to hedge, or guessing at prices, many are opting not to sell the homes until they're nearly completed. So, construction is continuing to boom but the “sales” are being pushed further into the cycle.

This is another example of how bottlenecks are making it tough to gauge just how strong the economy is.

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