Gold prices holding steady following drop in U.S. ISM Manufacturing Index
(Kitco News) - The gold market is holding on to strong gains but seeing little reaction to slowing momentum in the U.S. manufacturing sector, according to the latest data from the Institute for Supply Management (ISM).
Monday, the ISM said its nonmanufacturing index showed a reading of 58.7% for January, down from December’s reading of 60.7%. The data were much weaker than expected as consensus forecasts were calling for a reading of 60%.
The report showed that the sector is still expanding albeit at a slower pace than expected. 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.
““The manufacturing economy continued its recovery in January. Survey committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are continuing to cause strains that limit manufacturing growth potential,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.
Gold prices are seeing little reaction to the latest economic data as the market is seeing nearly 1% gains on the day. April gold futures last traded at $1,867.40 an ounce, up 0.92% on the day. According to some analysts gold prices are being led higher by a massive surge in silver prices, which have rallied to an eight-year high.
Looking at some of the components of the report, the New Orders Index fell to a reading of 61.1%, down from December’s reading of 67.5%. Meanwhile, the Production Index dropped to 60.7%, down from December’s reading of 64.7%.
Looking at the labor market, the report said that the Employment Index rose to 52.6%, up compared to the previous reading of 51.7%.
Not only did the manufacturing sector lose momentum last month but price pressures are on the rise, which is positive for gold as a traditional inflation hedge. The report said that the Price Index rose to 82.1%, up compared to the December reading of 77.6%.