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Investing.com -- The University of Michigan’s long-standing consumer sentiment survey, which has been conducted since 1955, last week reported one of the lowest readings in its history.
The preliminary reading for May 2025 stood at 50.8, indicating consumer uncertainty during the early months of President Trump’s term, particularly due to ongoing tariff disputes.
The university’s survey data was compared to gold prices this week, revealing a correlation between dwindling consumer confidence and a surge in gold prices. The survey’s index was inverted for this comparison to better illustrate this relationship.
The Consumer Sentiment Index has yet to return to its pre-Covid levels, according to Tom McClellan, editor of The McClellan Market Report. It accurately reflected low confidence during the 2022 bear market for stock prices and showed only a minor recovery as stocks rebounded in 2023-24.
With the recent introduction of President Trump’s tariffs, consumer confidence is once again on the decline, coinciding with a significant increase in gold prices. This correlation between gold prices and consumer confidence is not uncommon, as evidenced by the survey’s extensive historical data.
Past instances of low consumer confidence have often been accompanied by a rise in gold prices, though there have been exceptions.
In 1990, for example, the invasion of Kuwait by Iraq, which temporarily doubled crude oil prices, did not significantly affect gold prices. Once the war ended and confidence was restored, the correlation between the University of Michigan’s data and gold prices reemerged.
Another exception occurred during the 2008 Great Financial Crisis (GFC). Despite a sharp drop in consumer confidence, gold prices, which were already on an upward trend, continued to rise. Both consumer confidence and gold prices eventually peaked together in 2011.
This correlation suggests that as consumer confidence improves, gold prices are likely to decrease. However, the chart does not provide any indication of when this shift in consumer sentiment might occur.
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