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Gold prices jump after U.S. ISM Manufacturing Index falls deeper into contraction territory

Kitco News

(Kitco News) - Gold prices are pushing back into positive territory as sentiment in the U.S. manufacturing dropped further into contraction territory last month, according to the latest data from the Institute for Supply management (ISM).

Tuesday, the ISM said its manufacturing index showed a reading of 47.8% for September, down from August’s reading of 49.1%. The data was much weaker than expected as consensus forecasts were calling for a reading of 50.5%.

According to the report, this is the worst reading for the manufacturing sector since June 2009.

“Comments from the panel reflect a continuing decrease in business confidence,” the report said Timothy Fiore, chair of ISM manufacturing business survey committee. “Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019. Overall, sentiment this month remains cautious regarding near-term growth.”

Readings above 50% in such diffusion indexes are seen as a sign of economic growth, and vice-versa. The farther an indicator is above or below 50%, the greater or smaller the rate of change.

Ahead of the report the gold prices were struggling to momentum after prices dropped through the 50-day moving average last week and pushed through critical initial support levels at the start of the new trading week. The yellow metal has regained some of Monday’s losses; December gold futures last traded at $1,478.50 an ounce, up 0.40% on the day.

Looking at the components of the report, the New Orders Index dropped to a reading of 47.8%, down from August’s reading of 49.1%; meanwhile the Production Index dropped to 47.3%, down from the previous reading of 49.5%.

The labor market also lost some momentum with the Employment Index falling to 46.3%, down from August’s reading of 47.4%.

Inflation also appears to be moving higher, which could help support gold prices. The Prices Index rose to 49.7%, up from the previous reading of 46%.

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