(Kitco News) - The gold market is trading near session highs after the latest data showed consumer sentiment in the U.S. declining, with shorter-term inflation expectations ticking higher.
The University of Michigan announced on Friday that the preliminary reading of its Consumer Sentiment survey for August was 51. The data was worse than expectations, as the consensus forecast of economists called for a reading of 54.5. It was also significantly lower than July’s final reading of 55.2.
“Consumer sentiment fell about 8% this August, ending two consecutive months of improvement,” said Surveys of Consumers Director Joanne Hsu. “While views of personal finances saw only minor declines, expected business conditions sank 11% for the short run and 17% for the long run. Decreases in sentiment were seen across the political spectrum, with Republicans exhibiting the strongest month-to-month decline in August. Sentiment among Republicans is now 19% below readings just prior to the Iran conflict and the lowest since the 2024 election.”
“Although the early-month weakening in sentiment was pervasive across various demographic groups, notably large reductions were seen among older consumers, lower-income consumers, and those without a college degree,” she added. “These groups are all particularly vulnerable to any erosion of purchasing power stemming from inflation. Across all consumers, only 8% expect their income growth to exceed inflation in the year ahead, down from 18% in December 2024, a reflection of the belief that high prices will continue to be burdensome.”
Spot gold was approaching its session high as it attempted to reclaim the $4,400 per ounce level after the 10 am ET data release, and last traded at $4,389.03 per ounce for a gain of 0.87% on the day.
The August index showed a rise in year-ahead inflation expectations, while longer-run expectations held steady, and both remained above historical averages.
“Year-ahead inflation expectations ticked up from 4.2% in July to 4.3% this month,” Hsu wrote. “The current reading substantially exceeds the 3.4% seen in February before the Iran conflict began, along with all 2024 readings. Long-run inflation expectations held steady at 3.3% for the third consecutive month, remaining a bit higher than its 2024 range of 2.8% to 3.2%.”
