Gold price drops following slightly weaker ISM manufacturing data
(Kitco News) - Gold prices are struggling to find momentum at the start of the week even as sentiment in the U.S. manufacturing sector remains in deep contraction territory, according to the latest data from Institute for Supply Management (ISM).
Monday, the ISM said that its Purchasing Managers Index rose to a reading of 43.1%, up from April’s reading of 41.5%; however, the data were slightly worse than expected as consensus forecasts were calling for a reading around 43.5%.
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 future prices dropped sharply, falling to a session low, on initial reaction to the data and remain under some selling pressure. August gold futures last traded at $1,742.50 an ounce, down 0.53% on the day.
For some economists, the latest data creates further doubt that the U.S. economy will see a sharp recovery as lock-down measures start to ease across the country.
“Three months into the manufacturing disruption caused by the coronavirus (COVID-19) pandemic, comments from the panel were cautious, regarding the near-term outlook. As was the case in April, the PMI® indicates a level of manufacturing-sector contraction not seen since April 2009; however, the trajectory improved,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.
“The coronavirus pandemic impacted all manufacturing sectors for the third straight month. May appears to be a transition month, as many panelists and their suppliers returned to work late in the month. However, demand remains uncertain, likely impacting inventories, customer inventories, employment, imports and backlog of orders,” Fiore added.
Looking at the components of the report the New Orders Index increased to a reading of 31.8%, up from April’s reading of 27.1%; meanwhile, the production index showed a reading of 33.2% up from April’s reading of 27.5%.
Looking at the labor market, the report said that its Employment Index rose to 32.1%, up from April’s level of 27.5%.