US consumer confidence rises by the most in over 30 years: here's what it means for gold and stocks

On January 19th, the University of Michigan released the preliminary data for its widely-regarded Survey of Consumers and Index of Consumer Sentiment for January 2024.

According to the university, consumer confidence in December 2023 and January 2024 seems to have risen by the most that two consecutive months have risen in more than three decades, since the 1990s:

Consumer confidence and the XAU/USD

Unfortunately for gold investors and traders, these figures could mean a continuing downtrend for the precious metal.

Gold has been considered a hedge against both inflation and economic hard times for centuries, and is well-known to be negatively correlated to increases in economic activity and expansion.

The gold price has certainly lost its shine in recent weeks, falling to around $2,027 per ounce today, sparking fears that it might fall to below the $2,000 support level soon. This means that the spot gold price has dropped almost two percent per ounce in January so far.

Consumer confidence and the stock market

So, with consumer confidence on the rise and gold prices retreating, shouldn’t equities should be unequivocally outperforming?

Interestingly enough, it’s a little more nuanced than that, according to some experts.

In their research for The Journal of Portfolio Management, academics Kenneth Fisher and Meir Statman state that a rise in positive consumer sentiment data affects stock prices in surprising ways – for individual investors, if not institutional ones:

Here is how Charles Schwab director Nathan Peterson saw it, in his podcast on the same day as the Michigan Survey of Consumers came out:

The final January data for the Index of Consumer Sentiment is due on February 2nd.