Gold prices advance as U.S. consumer confidence beats expectations in June
(Kitco News) Gold prices climbed after digesting the news that the U.S. consumer confidence index beat expectations in June.
American consumer confidence index rose to 98.1 in June, from May’s downwardly revised reading of 85.9, the U.S. Conference Board reported Tuesday. Economists were expecting to see the index at a reading of 91.8.
Gold prices first ignored the data and then began rising as bullish traders stepped in to buy the dip with the August Comex gold futures last at $1,788.30 an ounce, up 0.40% on the day.
The Present Situation Index, which describes consumers’ views on current business and labor market conditions, increased to 86.2 from 68.4. On top of that, the Expectations Index, which represents consumers’ short-term outlook on income, business, and labor market, rose to 106.0 from 97.6.
Even though American consumers are hopeful about the short-term outlook, the overall path to an economic recovery remains uncertain, said Lynn Franco, senior director of Economic Indicators at The Conference Board.
“Consumer Confidence partially rebounded in June but remains well below pre-pandemic levels,” Franco said. “The Present Situation Index suggests that economic conditions remain weak. Looking ahead, consumers are less pessimistic about the short-term outlook, but do not foresee a significant pickup in economic activity. Faced with an uncertain and uneven path to recovery, and a potential COVID-19 resurgence, it’s too soon to say that consumers have turned the corner and are ready to begin spending at pre-pandemic levels.”
Looking at the labor market, the report noted that the outlook on jobs was mixed. The proportion expecting more jobs in the months ahead fell from 39.5% to 38.4%, while those anticipating fewer jobs in the months ahead also declined from 19.9% to 14.2%.
Traders closely watch the consumer optimism survey as it is a potential leading indicator for economic growth. The more optimistic consumers feel, the more likely they are going to spend money and vice versa.
The June consumer confidence survey likely missed the increasing coronavirus cases count at the end of the month, said CIBC Capital Markets senior economist Andrew Grantham.
“In a sign that the survey may not have picked up much of the impact from the recent spike in case counts, consumer confidence was up in Florida and Texas, with the former actually posting a much bigger increase than the national average. That puts a big question mark over what today's consumer confidence figure means for future spending growth,” Grantham wrote in a note to clients.