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Gold Prices Edge Up Amid Modest Selling Pressure As ISM Non-Manufacturing PMI Disappoints

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ISM Non-Manufacturing PMI

(Kitco News) - Gold prices edged up, but remained in the negative territory, after momentum in the service sector disappointed, according to the latest data from the Institute of Supply Management (ISM).

The Non-Manufacturing Purchasing Managers Index slipped to a reading of 55.9% in December, down from November’s reading of 57.4%. The decline was a surprise to the markets, which expected the index to climb to 57.8%.

Readings above 50 are seen as a sign of economic growth; the farther an indicator is above or below 50, the greater or smaller the rate of change.

In an initial reaction to the latest ISM Non-Manufacturing index, gold prices remained in the negative territory after losing their short-lived morning gains prior to the releas. February Comex gold futures were last seen trading at $1,320.30, down 0.10% on the day.

“Gold prices have faded again as the U.S. dollar has regained the advances it briefly lost after the jobs report,” said Kitco’s senior technical analyst Jim Wyckoff

Earlier on Friday, the yellow metal rose above $1,320, boosted by disappointing U.S. nonfarm payrolls data from December, which came in below expectation at just 148,000 newly created jobs versus the expected 190,000. 

One of the positive elements in the ISM report was improving momentum in the labor market, with the employment index ticking up one percentage point to a reading of 56.3%, compared with November’s 55.3%. Economists keep a close eye on the index as a gauge into the employment situation in the country.

Looking at other components of the ISM Non-Manufacturing PMI, the business activity index dropped 4.1 percentage points to 57.3% from November’s reading of 61.4%. At the same time, the new orders index fell to 54.3%, compared to the previous reading of 58.7%.

Inflation pressures rose for the seventh consecutive month, with the price index edging up to 60.8% from November’s 60.7%.

Economists were not too discouraged by the weaker-than-expected report, suggesting that their GDP forecasts for Q4 remain intact.

“The unexpected decline in the ISM non-manufacturing . . . echoes the slightly weaker gain in non-farm payrolls in suggesting that the economy may have lost a little momentum at the end of 2017,” said Andrew Hunter, U.S. economist at Capital Economics. “Nonetheless, we still estimate that fourth-quarter GDP growth was a healthy 2.7% annualized and, given the fiscal stimulus, expect that strength to continue for a while yet.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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