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Gold prices can't find sustained momentum even after disappointing U.S. ISM Data

Kitco News

(Kitco News) - Gold prices are still struggling to find momentum even as sentiment in the manufacturing sector dropped further into contraction territory in November, according to the latest data from the Institute for Supply Management (ISM).

Monday the ISM said its manufacturing index showed a reading of 48.1% for November down from October’s reading of 48.3%. The data was weaker than expected as consensus forecasts were calling for a reading of 49.2%.

This is the fifth consecutive month that the index has missed expectation. It is also the fourth consecutive month the index has been in contraction territory. 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.

Gold prices spiked briefing in initial reaction to the data even as priced remained in the red; the market has given up its initial push. February gold futures last traded at $1,466.40 an ounce, down 0.43% on the day.

Looking at the components of the report the ISM said that the New Orders Index dropped to a reading of 47.2%, down from October reading of 49.1%. Meanwhile, the Production Index rose to 49.1%, up compared to the October reading of 46.2%.

The report also noted a drop in momentum in the labor market. The ISM Employment Index came in at 46.6%, a 1.1-percentage point decrease from the October reading of 47.7%.

“Global trade remains the most significant cross-industry issue,” the report said.

Avery Shenfeld, senior economist at CIBC, said that the disappointing manufacturing data points to growth “no better than 1%” in the fourth quarter.

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