Gold Price Doesn't Budge After New York Fed Highlights Higher Inflation In 2022

The gold market is off its lows but still struggling in negative territory, finding little traction as data from the Federal Reserve of New York further highlighted the growing inflation threat.

Monday, the regional central bank released the results of its May consumer expectation survey. Traditionally, the report doesn't garner much media attention, but markets are sensitive to the looming inflation threat.

The report said that median inflation in May 2022 will increase by 0.6 percentage points to 4.0%. The report noted that this is the seventh consecutive monthly increase and a new series high.

Looking further out, the report said that median inflation expectations for 2024 increased from 3.1% to 3.6%. The report added that this is the second-highest level in this series, behind only behind data from August 2013.

According to some economists and analysts, the Federal Reserve has been effective in managing inflation expectations. Federal Reserve Chair Jerome Powell has said on many occasions that the central bank expects rising inflation to be transitory as the economy continues to recover from the COVID-19 pandemic.

However, the latest data from the New York Fed pours some cold water on those expectations.

Although gold prices have struggled to push above $1,900 an ounce, many market analysts remain bullish on gold as a hedge against rising price pressures. Many analysts have said that inflation pressures will prove to be more permanent than the Federal Reserve is expecting.

August gold futures last traded at $1,865.50 an ounce, down 0.75% on the day.

While inflation pressures are expected to rise, consumers are not expecting their income to keep up.

The report said that the median expected growth in household income increased to 2.8% last month, the highest level since January 2020. At the same time, median household spending growth expectations rose to a series high of 5.0%.

"Perceptions about households' current financial situations compared to a year ago deteriorated slightly in May, with more respondents reporting being financially worse off than they were a year ago," the report said. "Respondents were also more pessimistic about their households' financial situations in the year ahead, with fewer respondents expecting their financial situation to improve a year from now."

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