UofM Consumer sentiment falls to 63, providing support for gold 2% gains

The gold market is holding on to solid gains Friday as U.S. economic data points to a growing risk of stagflation, as consumer sentiment continues to drop but inflation expectations rise sharplUofM Consumer sentiment falls to 63, providing support for gold 2% gainsy.

Friday, the University of Michigan said the preliminary reading of its Consumer Sentiment Index fell to 63, down from September's reading of 68.1. The data was significantly weaker than expected, as economists were forecasting a drop to 67.2.

"Consumer sentiment fell back about 7% this October following two consecutive months of very little change. Assessments of personal finances declined about 15%, primarily on a substantial increase in concerns over inflation, and one-year expected business conditions plunged about 19%. However, long-run expected business conditions are little changed, suggesting that consumers believe the current worsening in economic conditions will not persist," said Joanne Hsu, director of Surveys of Consumers, in the report.

The gold market was already seeing a significant rally ahead of the report. Still, the disappointing data has provided further support. December gold futures last traded at $1,925 an ounce, well above 2% on the day.

While falling consumer sentiment indicates weak consumption, the report also noted that inflation expectations jumped significantly. Consumers see inflation rising 3.8% by this time next year, up compared to 3.2% seen last month.

"The current reading is the highest since May 2023 and remains well above the 2.3-3.0% range seen in the two years prior to the pandemic," Hsu said in the report.

The survey also noted that long-term inflation expectations edged higher to 3.0%, up from 2.9%. However, consumer price expectations remain anchored in the new post-pandemic range.

"Long-run inflation expectations remain elevated relative to the 2.2-2.6% range seen in the two years pre-pandemic," the report said.

By

Neils Christensen

For Kitco News

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