(Kitco News) - The gold market continued to experience solid technical buying momentum even as rising consumer optimism reduced the precious metal’s allure as a safe haven.
Tuesday, the U.S. Conference Board said its Consumer Confidence Index rose to 102 in May, up sharply from April’s revised reading at 97.5. The data was stronger than expected, as economists forecasted an increase to 96.
Rising optimism has ended three consecutive months of disappointing sentiment. However, consumers still remain concerned about a potential slowdown later in the year.
The gold market is holding firm despite solid optimism. August gold futures last traded at $2,374.60 an ounce, up 0.74% on the day.
The report showed consumer sentiment is being driven by improving current economic conditions. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased to 143.1 in May, up from 140.6 in April.
At the same time, the Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—rose to 74.6 (1985=100) from 68.8 last month.
“Despite this improvement, for the fourth consecutive month, the Expectations Index was below 80, the threshold which usually signals a recession ahead,” the report said.
“the strong labor market continued to bolster consumers’ overall assessment of the present situation. Views of current labor market conditions improved in May, as fewer respondents said jobs were ‘hard to get,’ which outweighed a slight decline in the number who said jobs were ‘plentiful,’” said Dana M. Peterson, Chief Economist at The Conference Board in the report. “Looking ahead, fewer consumers expected deterioration in future business conditions, job availability, and income, resulting in an increase in the Expectation Index. Nonetheless, the overall confidence gauge remained within the relatively narrow range it has been hovering in for more than two years.”
Peterson noted that consumers earning over $100K expressed the largest rise in confidence. Meanwhile, she added that looking at the six-month moving average, confidence remains highest among the youngest (under 35) and wealthiest consumers.
The latest economic data is not having much impact on gold as it has not material shifted market expectations surrounding the Federal Reserve’s monetary policy. Markets are still pricing in a roughly 50/50 chance of a cut in September.
