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Stronger Consumer Sentiment in Early June: Negative for Gold?

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What’s the Consumer Sentiment Index?

The CSI (Consumer Sentiment Index) is a key indicator that gauges the average US consumer’s confidence level. This is an important indicator for retailers, economists, and investors. Thomson Reuters and the University of Michigan release the US CSI every month. The index rises when consumers gain confidence in the economy.

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Preliminary reading for June is up

The Thomson Reuters and University of Michigan’s preliminary reading for June 2015 on overall consumer sentiment came in at 94.6. This is a huge jump from May’s final reading of 90.7. The reading for May was the lowest since November 2014.

According to Richard Curtin, chief economist of the survey, “Consumer confidence rebounded in early June, regaining its average level recorded since the start of the year. The June gain was due to the most favorable personal financial prospects since 2007, with households expecting the largest wage gains since 2008.”

Fallout on gold

Stronger consumer sentiment usually indicates improving incomes and positive prospects for the economy. This leads to a strengthening of the US dollar. It also makes dollar-denominated gold less attractive.

As a result, high consumer sentiment is negative for gold (GLD) and gold stocks such as New Gold (NGD), Yamana Gold (AUY), B2Gold Corp (BTG), and Agnico Eagle Mines (AEM). It’s also negative for ETFs that invest in these stocks like the VanEck Vectors Gold Miners ETF (GDX). New Gold and Yamana Gold account for 2.2% and 4.1% of GDX’s total holdings, respectively.

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