Gold corrects after US data shows pessimism mixed with inflation fears

NEW YORK (May 13) Gold price (XAU/USD) corrects back, falling a half a percent to the $2,340s on Monday after US Consumer Sentiment data suggested interest rates may remain higher for longer, reducing Gold’s attractiveness as a non-yielding asset. 

Gold price falls after Michigan Sentiment Survey data

Gold price has reversed lower following the release of the University of Michigan Consumer Sentiment Survey on Friday, which showed a surprise fall in sentiment whilst at the same time higher inflation expectations. 

The preliminary University of Michigan Consumer Sentiment index for May fell to 67.4 from 77.2 when economists had expected a much gentler decline to 76.0. 

At the same time, the long-run inflation expectations component rose to 3.1% from 3.0% previously. 

Higher inflation expectations suggest the Federal Reserve (Fed) may continue to delay its expected move to cut interest rates. This is negative for Gold since higher interest rates increase the opportunity cost of holding Gold compared to interest-yielding assets like bonds or cash. 

FXStreet