Gold prices holding gains as U.S. ISM manufacturing sector remains in contraction territory at 47.7, rising in line with expectations
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Correction: The article initally quoted the ISM Price Index as the headline index. The article has been updated to reflect the corrected headline data..
(Kitco News) - The gold market is holding in positive territory as U.S. manufacturing data shows that inflation continues to heat up, according to the latest report from the Institute for Supply Management.
Wednesday, the ISM said that its manufacturing Purchasing Managers Index remained in contraction territory in February, rising to 47.7%, up slightly from January's reading of 44.7%. The data was in line with consensus estimates.
The report noted that activity in the manufacturing sector remains at its lowest point since May 2020, when the global economy was halted by the COVID-19 pandemic.
Readings above 50% in such diffusion indexes signify economic growth and vice-versa. The further an indicator is above or below 50%, the greater or smaller the rate of change.
However, according to some commodity analysts, the gold market is paying closer attention to the ISM inflation data. The report said that its Prices index rose to 51.3%. This is the first time the U.S. manufacturing prices has moved into expansion territory in four months.
Some analysts have said that rising prices in the manufacturing sector could mean the Federal Reserve won't have the ability to control inflation, even as it continues to aggressively tighten its monetary policies.
April gold futures last traded at $1,845 an ounce, up 0.45% on the day.
The gold market, while off its highs following the data, is still holding positive gains Wednesday even as the yield on 10-year notes rises above 4% for the first time since October.
Looking at the components of the report, the New Orders Index remained in contraction territory, rising to 47%, up from January's reading of 42.5%. At the same time, the Production index dropped to 47.3%, down from the previous reading of 48%.
The report noted that the labor market lost momentum, falling back into contraction territory with a reading of 49.1%, down from January's reading of 50.6%.