(Kitco News) - The gold market is trading higher ahead of the weekend after the latest data showed consumer sentiment in the U.S. improving more than expected, while near-term inflation expectations pulled back.
The University of Michigan announced on Friday that the preliminary reading of its Consumer Sentiment survey for July was 61.8, which was higher than June’s final reading of 60.7. The data was better than expectations, as the consensus forecast of economists called for a 61.5 reading.
“Consumer sentiment was little changed from June, inching up about one index point,” said Surveys of Consumers Director Joanne Hsu. “While sentiment reached its highest value in five months, it remains a substantial 16% below December 2024 and is well below its historical average.”
The gold market is trading near the upper edge of its daily range following the 10 am EDT data release, with spot gold last trading at $3,356.84 per ounce for a gain of 0.53% on the day.
The components of the July index were mixed, with a sharp rise in short-run expected business conditions and a significant drop in one-year inflation expectations, but longer-run inflation fears persisted.
“Short-run business conditions improved about 8%, whereas expected personal finances fell back about 4%,” Hsu noted. “Consumers are unlikely to regain their confidence in the economy unless they feel assured that inflation is unlikely to worsen, for example if trade policy stabilizes for the foreseeable future. At this time, the interviews reveal little evidence that other policy developments, including the recent passage of the tax and spending bill, moved the needle much on consumer sentiment.”
Year-ahead inflation expectations also fell for a second straight month, dropping from 5.0% in June to 4.4% this month. “Long-run inflation expectations receded for the third consecutive month, falling back from 4.0% in June to 3.6% in July,” she said. “Both readings are the lowest since February 2025 but remain above December 2024, indicating that consumers still perceive substantial risk that inflation will increase in the future.”
Jeffrey Roach, Chief Economist for LPL Financial, told Kitco News that while the index is still below last year’s optimistic levels, the improvement in sentiment is significant for consumers and for the Fed.
"Despite risks of rising consumer inflation in the next few months, consumers have well-anchored expectations that tariff inflation will be temporary, and that conditions should improve by the time we enter 2026," he said. "Inflation expectation is an important factor for the Fed and according to this report, the trajectory looks encouraging."
