Gold Rises Steadily Ahead of Weekend on Positive News

As consumer sentiment declines and inflation expectations rise, the gold market continues to hold steady and rise before the weekend.

The University of Michigan said on Friday that its consumer confidence survey fell to 68.9, lower than the revised 70.1 in September. The data was weaker than expected, as economists expected a moderate rise to 70.9.

The report noted that this was the first decline in consumer confidence in three months.

The gold market reacted little to the economic data. Analysts pointed out that the precious metal continues to maintain a strong technical buying momentum as investors bought the dip after a significant adjustment earlier this week. December gold futures last traded at $2,666.70 per ounce, up 1% for the day.

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Despite the market's expectations for the Federal Reserve's monetary policy beginning to shift, gold continues to attract investors' attention. Last week's strong jobs report, followed by consumer prices slightly higher than expected, forced the market to reduce expectations for a significant rate cut next month.

However, economists also pointed out that the economic slowdown will continue to force the U.S. central bank to cut interest rates, albeit at a slightly slower pace.

Despite a decline in consumer confidence in October, Joanne Hsu, director of the University of Michigan's Consumer Survey, said that consumer optimism remains resilient.

"Current sentiment is 8% stronger than a year ago and nearly 40% higher than the low point reached in June 2022. Despite a significant decline in inflation expectations since then, consumers continue to express frustration with high prices," she said. "Despite widespread news coverage of the Middle East and Ukraine, few consumers associate these developments with the economy. This month, concerns about these conflicts have risen, but are relatively rare, with less than 5% of consumers spontaneously mentioning them. With the upcoming elections, some consumers seem to be reserved about the long-term trajectory of the economy."

As consumer confidence declines, consumers also raise inflation expectations. According to the report, a year later, consumers expect the inflation rate to rise from 2.7% in September to 2.9%.

Despite persistent inflationary pressures, economists said it would have little impact on the Fed's easing cycle, as the Fed is now focused on the labor market and potential economic weakness.Capital Economics North America Economist Bradley Saunders said in a report: "The Federal Reserve will be dismayed to see its inflation forecast for the next year rise to 2.9% for the first time in five months from 2.7%. The CPI and PPI data released this week indicate that the Federal Reserve's preferred price indicator, the core personal consumption expenditure deflator, had an annualized rate of 2.9% last month. We are convinced that the Federal Reserve's next move will be a small rate cut of 25 basis points."

Market analysts pointed out that as real interest rates decline and weaken the purchasing power of the dollar, a stagflationary environment (high inflation rates but economic slowdown) is an ideal environment for gold.