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Gold Remains Under Pressure Despite Disappointing ISM Numbers

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(Kitco News) - Gold prices continue to hover near a four-month low even as momentum in the manufacturing sector continues to fade, according to the latest data from the Institute for Supply management (ISM)

Tuesday, the ISM said its manufacturing index showed a reading of 57.3% for April, down from March’s reading of 59.3%. The data was weaker than expected as consensus forecasts were calling for a reading of 58.4%.

The gold market has been ignoring most economic data as it is being weight down by surging momentum in the U.S. dollar. June gold futures last traded at $1,307.70 an ounce, down 0.86% on the day.

The components of the report showed broad-based weakness. The New Orders Index showed a reading of 61.2%, down from March’s reading of 61.9%; at the same time the Production Index dropped to 57.2%, down from the previous level of 61%.

The manufacturing labor market is also starting to lose momentum with the Employment Index dropping to 54.2%, down from March’s reading of 57.3%.

The report also showed a strong rise in inflation pressures; The Prices Index increased 79.2% in April up from the previous reading of 78.1. The report noted that inflation is at its highest level since April 2011.

Rising price pressures is positive for gold as it is sees as a hedge against higher inflation.

Some economists are shrugging of the disappointing headline data noting that the index is still in expansionary territory.

“The cooling in the ISM index is more in line with the sideways trend we've seen recently in core capital goods orders. That being said, we continue to expect tax reform, particularly related to the accelerated depreciation of machinery and equipment will support factory activity this year,” said Katherine Judge, senior economist at CIBC World Markets.

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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