Key Takeaways:
Spot gold prices fell to session lows Friday after the University of Michigan's final May consumer sentiment survey registered 44.8, a record low that missed consensus forecasts and signaled rising inflation fears.
"The cost of living continues to be a first-order concern, with 57% of consumers spontaneously mentioning that high prices were eroding their personal finances, up from 50% last month," Joanne Hsu, director of the university’s Surveys of Consumers, said in a statement.
The final May reading of 44.8 was below the preliminary 48.2 and April's 49.8 reading. The survey's measure of one-year inflation expectations rose to 4.8% from 4.7% in April, while five-year inflation expectations shot up to 3.9% from 3.5%.
The data points to potential stagflationary pressures on the U.S. economy, complicating the Federal Reserve's monetary policy. The prospect of a more hawkish Fed to combat inflation expectations weighed on gold prices, which typically have an inverse relationship with the U.S. dollar and interest rates.
The plunge in sentiment comes as Americans grapple with the economic fallout from the US-Israeli war in Iran, which has triggered an oil supply crunch and subsequent price shocks. This has exacerbated concerns over high inflation that have persisted for years. The University of Michigan’s sentiment survey, which dates back to 1952, shows Americans are feeling worse now than during previous crises, including the Great Recession and the Covid-19 pandemic.
Some analysts, however, have questioned the survey's methodology. Fundstrat's Tom Lee has criticized the University of Michigan survey for what he calls a "notoriously partisan" skew, suggesting the headline number may not be a fair representation of the broader economic picture.
This article is for informational purposes only and does not constitute investment advice.
