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Gold prices remain under pressure as UofM consumer sentiment falls to 60.4; inflation expectations remains elevated

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(Kitco News) - The gold market remains under solid selling pressure and is largely ignoring persistent inflation pressure and weaker-than-expected consumer sentiment data that points to lower consumption growth.

Friday, the University of Michigan said the preliminary reading of its Consumer Sentiment Index fell to 60.4, down from October's revised reading of 63.8. The data was significantly weaker than expected, as economists looked for a stable reading of around 63.7.

The gold market is not seeing much reaction to the disappointing economic data. December gold futures last traded at $1,948.50 an ounce, down 1% on the day. According to some analysts, the gold market continues to digest hawkish comments from Federal Reserve Chair Jerome Powell.

Thursday, at an event hosted by the International Monetary Fund, Powell said that the central bank is not "confident" that monetary policy is restrictive enough to bring inflation down to the 2% target.

Powell also said that the central bank would not hesitate to raise interest rates again if inflation pressures continued to rise.

Consumer inflation data in the survey also supports the Federal Reserve's expectations that interest rates will remain elevated for the foreseeable future. The report said that in a year from now, consumers see inflation rising 4.4%, up from September's revised one-year inflation forecast of 4.2%.

The report said that geopolitical uncertainty and the Federal Reserve's aggressive monetary policy stance are two significant factors weighing on consumer sentiment.

"While current and expected personal finances both improved modestly this month, the long-run economic outlook slid 12%, in part due to growing concerns about the negative effects of high interest rates. Ongoing wars in Gaza and Ukraine weighed on many consumers as well. Overall, lower-income consumers and younger consumers exhibited the strongest declines in sentiment," said Joanne Hsu, director of consumer surveys, in the report.

Last week, after leaving interest rates unchanged, Powell, in his press conference, missed the UofM's sharp rise in inflation expectations. He said that other surveys show inflation remains well anchored.

However, Hsu said that October's elevated print shows September's sharp rise was not a "fluke."

"The current reading is the highest since November 2022 and remains well above the 2.3-3.0% range seen in the two years prior to the pandemic. Long-run inflation expectations also rose, from 3.0% last month to 3.2% this month, the highest reading since 2011," she said.

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