The Gold Price and Consumer Sentiment

The price of gold has correlated inversely to consumer sentiment the past ten years.

As consumer sentiment falls, the price of gold rises.

When consumer sentiment rises, the price of gold falls.

The Lowest Cost. Period.

Is the Price of Gold Simply a Matter of Sentiment?

The Consumer Sentiment and Gold Price Correlation

Investors analyze many data points when projecting the gold price. They may look at interest rates, real interest rates, gold supply and demand, political uncertainty, the Yen/Dollar relationship, central bank buying by China and Russia, open interest on the COMEX or Gold ETF flows. Others just give up trying to project the gold price and resign themselves that the gold price is subject ot the whims of manipulators.

Investors may also wish to consider the correlation of consumer sentiment as measured by the University of Michigan and the gold price. The highest prices of gold since 2008 have been during times when the University of Michigan’s consumer sentiment index was at its lowest. Consumer sentiment hit a low of 55.8 in August of 2011 and the average gold price hit a high of $1755.81 an ounce the same month.

As consumer sentiment rose from its lows the price of gold fell. When consumer sentiment hit a ten year high of 98.2 in December 2016, gold hit low of $1151.5 per ounce the same month.

The chart below shows the average monthly gold price vs the University of Michigan’s Consumer Sentiment Index (increased by a factor of ten consistentlyfor purposes of making a more visible comparision to the price of gold)

Consumer sentiment and gold price January 2008 -June 2017

Sources: University of Michigan Consumer Sentiment and Kitco.

Consumer sentiment and gold price January 2008 - June 2018

University of Michigan, University of Michigan: Consumer Sentiment [UMCSENT], retrieved from FRED, Federal Reserve Bank of St. Louis;, July 31, 2018. Copyright, 2016, Surveys of Consumers, University of Michigan. Reprinted with permission.

Gold Price data: Kitco

Gold ETF demand 2004- July 2017

Gold ETF demand also roughly tracks the price of gold.

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