Consumer Confidence Plummets, Gold Hits Record High

Worries about jobs drove the September Consumer Confidence Index sharply lower to 98.7 from 105.6 in August, the Conference Board said.

Meanwhile investors continued to pile into gold driving the precious metal to another record high at $2,670 an ounce in late September.

The September plunge in consumer confidence marked the biggest drop since August 2021 and showed deterioration in all five components of the index. Big picture, Americans worry about the upcoming U.S. Presidential election, the increasing military conflict around the globe, and the on-going high cost of everyday items like food and interest on loans for homes, cars and credit cards.

Concerns about the labor market were a key factor in the confidence decline, the Conference Board said. In September, Americans were more pessimistic about future labor market conditions and less positive about future business conditions and future income.

Here’s some details:

• The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell by 10.3 points to 124.3.
• The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined by 4.6 points to 81.7

Looking ahead…

Falling confidence could lead to lower consumer spending. Consumer buying plans for big-ticket appliances were mixed and plans to buy a smartphone or laptop/PC in the next six months eased, the Conference Board said.

The United States economy is consumer based and consumer driven. Consumer spending drives almost 70% of total gross domestic product (GDP). That means if people are less confident and spend less, the economy will slow in the months ahead.

The dramatic drop in confidence surprised many on Wall Street and is a signal of the conflicting views between Main Street and Wall Street. In the meantime, investors continue to turn to the safety of gold and silver.

Precious Metals Performance

Gold has surged 29% higher in 2024 and silver is up 21%, with silver recently touching a new 12-year high. Gold is a proven portfolio diversifier which provides investors with protection against equity market declines. Research shows that gold becomes more negatively correlated to stocks during extreme market sell-offs. (That’s a good thing and means that when stocks crash, gold typically climbs.)

• Gold has been particularly effective during periods of systemic risk, generating positive returns in nine of the ten worst years of performance for the global equity index, according to new research from Goldhub.

The Bottom Line

Investors who own gold have done better than portfolios without gold over the past twenty years. Is your portfolio properly allocated to deliver maximum returns and maximum safety? If you aren’t sure, give us a call we are happy to help.

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