Gold price remains under pressure even as UofM consumer sentiment falls to 50-year low; inflation expectations rise
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(Kitco News) -The gold market continues to struggle under strong technical selling pressure. It is unable to find any bullish traction even as consumer sentiment falls to its lowest levels in 40 years.
Friday, the University of Michigan said that a preliminary estimate of its consumer sentiment survey fell to a reading of 50.2, down from May’s reading of 58.4. The data significantly missed expectations as consensus forecasts were looking for a print of around 58.2.
“Consumer sentiment declined by 14% from May, continuing a downward trend over the last year and reaching its lowest recorded value, comparable to the trough reached in the middle of the 1980 recession,” said Joanne Hsu Director of the Surveys of Consumers at the university. “All components of the sentiment index fell this month, with the steepest decline in the year-ahead outlook in business conditions.”
Not only are consumers relatively fairly pessimistic about the economy, but they also see inflation pressures rising. The report said that one-year inflation expectations rose to 5.4%, up from the previous estimate of 5.3%.
Consumer expectations come after the U.S. Labor Department said its Consumer Price Index saw an annual rise of 8.6% in May. Consumer prices have hit a new 40-year high, driven by rising food and energy prices.
The gold market is seeing little reaction to the latest disappointing economic data. The market has been under pressure after failing to hold the critical level at $1,850 an ounce. August gold futures last traded at $1,834.40 an ounce, down roughly 1% on the day.
Andrew Hunter, Senior U.S. Economist at Capital Economics said that with inflation continuing to impact consumer purchasing power, it’s not surprising that sentiment has fallen to a 50-year low.
Despite fairly resilient consumer demand and a strong labor market, Hunter added that the latest report shows growing risks of weaker economic growth through 2022.
“So far there still isn’t much sign that weak confidence is affecting consumer spending, but it represents a downside risk to the near-term outlook – particularly when consumers have been funding their spending by running down savings,” he said.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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