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Gold price holding gains despite strong rise in U.S. consumer confidence

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(Kitco News) - The gold market is holding gains and moving closer to $1,800 an ounce even as U.S. consumers are significantly optimistic that the economy will see a robust recovery this year.

Tuesday, the U.S. Conference Board said that its Consumer Confidence Index rose to a reading of 121.7, up from March’s revised reading of 109.7. The data beat expectations as economists were expecting a reading around 113.1.

Consumer confidence has nearly pushed to its pre-pandemic levels last year.

“We're still not back to pre-pandemic levels but this is a big improvement. The market reaction has been mute though, with eyes on the Fed tomorrow,” said Adam Button, head of currency strategy at Forexlive.com

The stronger than expected data is having little impact on the gold market as prices hold relatively steady in initial reaction. June gold futures last traded at $1,783.40 an ounce, up 0.19% on the day.

Although at first blush, strong economic data is negative for gold prices, as it reduced the precious metal's safe-haven allure, some market analysts have said that robust growth expectations is leading to concerns about rising inflation pressures. Some analysts have said that gold will continue to be an important inflation hedge as the U.S. economy continues to recover from the COVID-19 pandemic.

“This report confirms that consumers are feeling better about economic times and it is consistent with expectations for an acceleration in growth,” said Katherine Judge, senior economist at CIBC.

The report noted that the gains made in consumer confidence was the result of a sharp improvement in near-term sentiment. The report’s Present Situation Index—based on consumers’ assessment of current business and labor market conditions—soared to 139.6, compared to March’s reading of 110.1. Meanwhile the Expectations Index rose moderately to 109.8, from 108.3 last month.

 “Consumers’ assessment of current conditions improved significantly in April, suggesting the economic recovery strengthened further in early Q2. Consumers’ optimism about the short-term outlook held steady this month,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board said in the report.

“Consumers were more upbeat about their income prospects, perhaps due to the improving job market and the recent round of stimulus checks. Short-term inflation expectations held steady in April, but remain elevated. Vacation intentions posted a healthy increase, likely boosted by the accelerating vaccine rollout and further loosening of pandemic restrictions,” she added.

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