The gold market is experiencing increased selling pressure, despite persistent inflation and weaker consumer sentiment data that indicates lower consumption growth. The University of Michigan reported on Friday that its Consumer Sentiment Index fell to 60.4, down from the previous month’s reading of 63.8, which was much weaker than expected. While this data would typically have a significant impact on the gold market, it has not seen much reaction. December gold futures have last traded at $1,948.50 an ounce, down 1% for the day.
The lack of reaction from the gold market can be attributed to the hawkish comments made by Federal Reserve Chair Jerome Powell. According to Powell, the central bank is not confident that monetary policy is restrictive enough to bring inflation down to the 2% target. He also stated that the central bank would not hesitate to raise interest rates again if inflation pressures continued to rise. Additionally, the consumer inflation data supports the Federal Reserve’s expectations that interest rates will remain elevated for the foreseeable future.
Consumer sentiment is being weighed down by geopolitical uncertainty and the Federal Reserve’s aggressive monetary policy stance, with lower-income and younger consumers exhibiting the strongest declines in sentiment. There are growing concerns about the negative effects of high interest rates, and ongoing wars in Gaza and Ukraine are also impacting consumer sentiment. Despite this, gold prices remain under pressure, with December gold futures trading at $1,948.50 an ounce, down 1% on the day. The lack of reaction from the gold market is surprising given the economic data, but can be explained by the hawkish comments from the Federal Reserve and the persistence of inflation pressures.
