Gold breaks above $4,130/oz after final Consumer Sentiment drops to 53.6 in October

NEW YORK (October 24) The gold market shot back into positive territory ahead of the weekend after the latest data showed consumer sentiment in the U.S. declining, while longer-term inflation expectations rose higher once again.

The University of Michigan announced on Friday that the final reading of its Consumer Sentiment survey for October was 53.6. The data was worse than expectations, as the consensus forecast of economists called for a reading of 55, the same as the preliminary number, and it was also below September’s final reading of 55.1.

“A modest increase in sentiment among younger consumers was offset by decreases among middle-age and older consumers,” said Surveys of Consumers Director Joanne Hsu. “Current personal finances inched up, while expected personal finances receded. Overall, consumers perceive few material changes in economic circumstances from last month; inflation and high prices remain at the forefront of consumers’ minds.”

Gold prices shot back into positive territory on the session following the 10 am EDT data release, with spot gold last trading at $4,132.27 per ounce for a gain of 0.15% on the day.

The components of the September index showed a mixed picture of consumer sentiment, with short-term inflation expectations receding while longer-term measures rose. 

Year-ahead inflation expectations ticked down from 4.7% last month to 4.6% this month. “These expectations are currently midway between the readings seen a year ago and the highs seen this year in May in the wake of the initial announcements of major tariff changes,” the report noted. “Long-run inflation expectations increased from 3.7% last month to 3.9% this month but remains below this year’s high point seen in April.”

“This month’s increase in long-run inflation expectations was driven primarily by independents and Republicans,” Hsu wrote. “Inflation uncertainty—as measured by the interquartile range of expectations—ticked up for both time horizons this month.”

She added that there was little evidence that consumers connected the federal government shutdown to the economy. “Only about 2% spontaneously referenced the shutdown during this month’s interviews, compared with the 10% of consumers who did so in January 2019 during that 35-day shutdown,” Hsu noted.

Eric Teal, Chief Investment Officer for Comerica Wealth Management, told Kitco News that consumers are worried about a stagflation scenario with unemployment expectations high and inflation reaccelerating.

"The wealth effect has been powerful for top earners, but lower-end consumption is still struggling with higher revolving debt interest and inflated prices," he said. "Lower interest rates and tax incentives are on the horizon, so expect some improvement to sentiment in the coming months."

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