(Kitco News) - The gold market is holding onto solid ahead of the weekend as U.S. consumers worry about the health of the economy and stubbornly elevated inflation pressures.
Friday, the University of Michigan said the preliminary reading of its Consumer Sentiment Index fell to 67.4 from April’s reading of 77.2. The data was weaker than expected as consensus forecasts called for a reading of around 76.3.
Sentiment has dropped to a five-month low.
The gold market has seen renewed bullish momentum since Thursday’s disappointing weekly jobless claims numbers, which showed the U.S. labor market losing momentum. The precious metal has added to those gains ahead of the weekend.
June gold futures last traded at $2,379.60 an ounce,m up 1.68% on the day.
Along with the disappointing sentiment, the report also noted that consumers see inflation rising 3.5% by this time next year, up sharply from 3.2% reported last month.
According to some analysts, the latest consumer sentiment data puts the Federal Reserve in a difficult position. Lower optimism could weigh on consumption, which would support easing from the central bank; however, higher inflation expectations would support the current restrictive policy.
Greg Michalowski, Currency Analyst at Forexlive.com, said it was “A worrisome report in that inflation expectations rose while consumer sentiment moved lower.”
Surveys of Consumers Director Joanne Hsu noted that the latest drop comes after three months of steady sentiment.
“This 10 index-point decline is statistically significant and brings sentiment to its lowest reading in about six months. This month’s trend in sentiment is characterized by a broad consensus across consumers, with decreases across age, income, and education groups,” Hsu said.
Looking at the inflation trend, Hsu noted that this is the second month inflation expectations were pushed outside their two-year range before the COVID-19 pandemic. At the same time, long-run inflation expectations have moved to the top of their two-year post-pandemic range.
