Gold is climbing following the news that US consumer sentiment dropped for the first time in three months in April, with the long-term economic outlook reaching the lowest point in over a year.
Key Takeaways
- The University of Michigan’s preliminary sentiment index dropped to 96.9 in April after a reading of 98.4 the month prior and compared to predictions of a more modest drop to 98.0.
- Current conditions were gauged at 114.2, a four-month high, and expectations for future economic conditions dropped to 85.8.
- Overall, the index has hit a three-month low, below market expectations.
Enthusiasm over tax cuts has diminished, according to the survey, with spontaneous favorable references to the stimulus package dropping sharply since early last year. The long-term outlook for the US economy has dipped. The five year outlook is at the lowest level since January 2018. Higher stock prices and cautious central bank policy around interest rates have helped to bolster consumer sentiment.
Inflation expectations have fell, with slower price gains predicted. Inflation is expected to hit 2.4 for 2019, and 2.3 over the next 5 – 10 years, a 50-year low. The UoM survey helps inform Federal Reserve policies on inflation and interest rates.
Survey respondents still have a positive outlook on their own personal finances, with an index of prospects at the highest since 2004. Buying conditions for household durable goods rose to a four-month high, although there was an increased unfavorable view toward cars and houses.
55% of respondents expect interest rates to increase, the smallest amount since 2016.
A bit of weakness in US consumer sentiment for April, according to the preliminary read on the University of Michigan's survey data for this month. Nonetheless, the mild dip--the first in 3 months--still leaves the sentiment index at a healthy level https://t.co/7aH2JHaAUs pic.twitter.com/11jyTBXVvQ
— James Picerno (@jpicerno) April 12, 2019
Expert Outlook
Survey director Richard Curtin said “Consumer confidence continued its sideways shuffle in early April, posting an insignificant decline following the small gain recorded last month.”
Head of Macroeconomic Analysis at Saxo Bank Christopher Nicolas Dembik stated that the survey was a miss, describing it as a ”negative print”. He added that it’s “still in its long-term range and current economic conditions have improved a lot. The broad picture is positive as job market, wages and stock market continue to improve.”
Market Reaction
Spot gold last traded at $1,292.27/oz, up 0.28% with a high of $1,295.63/oz and a low of $1,290.07/oz. Having crashed through $1,300, today’s price action indicates that $1,290 is the new line of support. The upward motion seen in spot gold trading price has likely been influenced by the results of the survey which points to domestic economic difficulties, strengthening gold’s viability as a hedge.
Gold Price Chart
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