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Gold price hits 2.5-month lows as U.S. consumer confidence soars to pre-pandemic levels in June

Kitco News

(Kitco News) Gold prices were trading sharply lower after the U.S. consumer confidence index came in better-than-expected in June.

American consumer confidence index rose to 127.3 in June, from May's upwardly revised reading of 120.0, the U.S. Conference Board reported Tuesday. Economists were expecting to see the index at a reading of 119.

Gold prices tumbled to 2.5-month lows right before the data was released amid a stronger U.S. dollar. Gold remained under pressure following June’s consumer confidence number, with August Comex gold futures last down more than 1.4% on the day and trading at $1,754.30 an ounce. 

Tuesday morning gold was primarily being pushed down by gains in the U.S. dollar index, bearish near-term technical charts, and a lack of risk aversion in the marketplace, wrote Kitco’s senior analyst Jim Wyckoff.

The Present Situation Index, which describes consumers’ views on current business and labor market conditions, advanced to 157.7 from 148.7. At the same time, the Expectations Index, which represents consumers’ short-term outlook on income, business, and labor market conditions, rose to 107.0 from 100.9.

American consumer confidence is currently at the highest level since the start of the pandemic in March of last year, said Lynn Franco, senior director of Economic Indicators at The Conference Board.

"Consumers' assessment of current conditions improved again, suggesting economic growth has strengthened further in Q2. Consumers' short-term optimism rebounded, buoyed by expectations that business conditions and their own financial prospects will continue improving in the months ahead," Franco said.

Higher short-term inflation expectations are not impacting the consumer mindset just yet, the report noted.

"While short-term inflation expectations increased, this had little impact on consumers' confidence or purchasing intentions," Franco pointed out. "In fact, the proportion of consumers planning to purchase homes, automobiles, and major appliances all rose—a sign that consumer spending will continue to support economic growth in the short-term. Vacation intentions also rose, reflecting a continued increase in spending on services."

Looking at the labor market, the short-term outlook on jobs was mixed. The proportion expecting more jobs in the months ahead declined to 25.7% from 27.7%, while those anticipating fewer jobs declined to 16% from 17.5%.

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.

Live 24 hours gold chart [Kitco Inc.]

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