Gold surges to around $ 2040 on consumer optimism, Fed bets

The gold market is holding near a six-month high, seeing some reaction to better-than-expected US consumer optimism. At the time of writing, gold is trading at $204.51 per ounce. It is up by +1.34%, with $27.13 gains.

The Conference Board said on Tuesday its consumer confidence index fell to 102 this month, compared to October’s revised reading of 99.1 The data beat expectations as consensus estimates looked a rise to 101.

Earlier on Tuesday, higher consumer optimism is not having much impact on gold. December gold futures are currently trading near session and six-month highs at $2,027.30 an ounce, up 0.74% on the day.

The report noted that consumers remain fair pessimistic on the near-term health of the economy with the Present Situation Index falling to 138.2, down from October’s reading at 138.3.

At the same time the Expectations Index rose sharply to 77.8, up from the previous reading at 72.7. However, the report also noted that sentiment still points to lower economic activity in the months ahead.

“While consumer fears of an impending recession abated slightly—to the lowest levels seen this year—around two-thirds of consumers surveyed in November still perceive a recession to be “somewhat” or “very likely” to occur over the next 12 months. This is consistent with the short and shallow recession we anticipate in the first half of 2024,” the report said.

Dana Peterson, Chief Economist at The Conference Board said that the survey shows investors remain concerned about inflation and geopolitical uncertainty even as sentiment improves.

“General improvements were seen across the spectrum of income groups surveyed in November. Nonetheless, write-in responses revealed consumers remain preoccupied with rising prices in general, followed by war/conflicts and higher interest rates,” said Peterson.

24 hours earlier, gold hit a six-month high on Monday as a softer dollar and expectations of a pause in the Federal Reserve’s monetary tightening helped bullion consolidate above the key $2,000 an ounce level.

Spot gold was up 0.5% at $2,012.34 per ounce by 3:01 p.m. ET (2001 GMT), after reaching its highest since May 16. U.S. gold futures settled 0.5% higher at $2012.4.

The Dollar Index (DXY) hovered near a three-month low, making greenback-priced gold less expensive for holders of other currencies. Gold is likely to trade around current level for a little bit until markets get some more information from the Fed on its plan on interest rates.

Gold will trade higher if they are done with rate hikes for the time being. Traders widely expect the American central bank to hold rates in December, while pricing in about a 50-50 chance of easing in May 2024.