Spot gold falls below $4,550/oz after final Consumer Sentiment falls to 51.7, one-year inflation expectations ease

The University of Michigan announced on Friday that the final reading of its Consumer Sentiment survey for August was 51.7. The data was better than expectations, as the consensus forecast of economists called for a reading of 51, but it was well below July’s final reading of 55.2.

“Consumer sentiment confirmed its early month reading, falling about 6% from last month and landing about 11% below a year ago amid continued worries that inflation will remain elevated for the foreseeable future,” said Surveys of Consumers Director Joanne Hsu. “Sentiment declines in August were seen for all political groups and were particularly acute among Republicans. Moreover, groups who are typically less-equipped to absorb increases in cost of living also exhibited stronger decreases in sentiment, including older consumers, lower- and middle-income consumers, and those with no stock holdings.”

“With ongoing policy uncertainty including the Iran conflict, consumers anticipate further increases in gasoline prices both in the short and long run. In addition to the pocketbook issues that have been central to consumers’ views of the economy, they are increasingly worried that prospects elsewhere in the economy could be weakening. Expected year-ahead business conditions fell back 10%, along with a 13% drop for the five-year horizon. Any re-escalation of trade tensions will likely exacerbate these trends.”

Spot gold fell to a fresh session low of $4,549.15 in the minutes following the 10 am ET data release, which came out at the same time as nonfarm payrolls revisions and Fed Chair Warsh’s Jackson Hole speech, and last traded at $4,556.41 per ounce for a loss of 0.99% on the day.

The August index showed a drop in year-ahead inflation expectations, while longer-run expectations held steady, though these remained high by historical standards.

“Year-ahead inflation expectations ticked down from 4.2% in July to 4.0%,” Hsu wrote. “The current reading substantially exceeds the 3.4% seen in February before the Iran conflict began, along with all 2024 readings. Long-run inflation expectations held steady at 3.3% for the third consecutive month, remaining a bit higher than its 2024 range of 2.8% to 3.2%."