(Kitco News) – The gold market is holding on to its daily gains but could continue to struggle as economic data points to healthy activity and well-anchored inflation.
Friday, the University of Michigan reported a solid rise in its preliminary consumer sentiment survey. The index rose to 78.8, its highest level since July 2021, and up from December’s reading at 69.7.
The economic data significantly beat economists’ expectations, as consensus forecasts called for a relatively unchanged reading.
The gold market, while off its lows from earlier in the week, remains fairly rangebound, seeing little movement in initial reaction to positive consumer sentiment data. February gold futures last traded at $2,029.10 an ounce, up 0.37% on the day.
Joanne Hsu, director of consumer survey at the university, said that the solid rise in sentiment “is no fluke.”
“Consumer views were supported by confidence that inflation has turned a corner and strengthening income expectations. Over the last two months, sentiment has climbed a cumulative 29%, the largest two-month increase since 1991 as a recession ended,” Hsu said in the report.
Along with the growing optimism, the report also also noted a sharp drop in inflation expectations, which could be positive for gold in the near-term.
According to survey responses, consumers see inflation rising 2.9% by this time next year, down compared to a forecasted rise in December of 3.1%.
“The current reading is the lowest since December 2020 and is now within the 2.3-3.0% range seen in the two years prior to the pandemic. Long-run inflation expectations edged down to 2.8% falling just below the 2.9-3.1% range seen for 26 of the last 30 months,” Hsu said.
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