What the Outlook for the US Economic Landscape Means for Gold
US consumer confidence
According to the US Conference Board, the US Consumer Confidence Index improved marginally in June 2017 to 118.9. The value for May was 117.6, which beat the market’s expectation of 116.0. It also fell in April and May. The fall in these months showed that consumer activity has fallen in the United States (IWM). Rising political uncertainty (IVV) (QQQ) likely hampered consumption activity.
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US economic growth
US economic growth for 1Q17 has been revised upward from 1.2% to 1.4% annually. The upgrade was due to exports and the strength in consumer spending. The outlook for 2Q17 is still uncertain due to the unclear policy path of the current administration. Inflation and growth have also remained below expectations.
IMF cuts growth forecast
On June 27, 2017, the IMF (International Monetary Fund) cut its forecast for the US economy from 2.5% to 2.1% for 2017. The IMF is increasingly skeptical about the Trump administration’s ability to deliver on its tax reform and infrastructure investment promises. It mentioned that the sustained 3.0% annual rate of growth expectations for the US economy is “extremely optimistic.” The IMF forecasts the growth rate to fall steadily over the next five years to around 1.7%.
A slower-than-expected growth for the US economy would be positive for gold (GLD). Miners such as Newmont Mining (NEM), Pan American Silver (PAAS), Franco-Nevada (FNV), and Royal Gold (RGLD) will be driven by economic data from the United States and the rest of the world.