(Kitco News) - The gold market continues to trade near session lows, testing support just above $1,700 and is finding little bullish momentum from better-than-expected economic data.
Thursday, the Institute for Supply Management said its manufacturing index was unchanged in August, holding at 52.8%. The data was better than expected as economists were looking for a drop to 52.1%.
The gold market is not seeing much reaction to economic data as surging momentum in the U.S. dollar continues to dominate the precious metal. December gold futures last traded at $1,704.20 an ounce, down 1.27% on the day.
Adam Button, chief currency strategist at Forexlive.com, said that the positive headline reading is helping to boost the U.S. dollar, which in turn is adding further weight to gold.
Analysts have said that positive activity in the U.S. manufacturing sector will continue to support the idea that the Federal Reserve can engineer a soft landing for the economy as it continues to raise interest rates.
“The U.S. manufacturing sector continues expanding at rates similar to the prior two months. New order rates returned to expansion levels, supplier deliveries remain at appropriate tension levels and prices softened again, reflecting movement toward supply/demand balance,” said Timothy Fiore Chair of the ISM Manufacturing Business Survey Committee. “According to Business Survey Committee respondents’ comments, companies continued to hire at strong rates in August, with few indications of layoffs, hiring freezes or head-count reductions through attrition.”
The report noted broad-based gains in the manufacturing sector. The report said that the New Orders Index rose to 51.3%, up from July’s reading of 48%.
A further negative for gold, the report highlighted falling inflation pressures. The Prices Index fell to 52.5%, down from 60% in July.
“This is the index’s lowest reading since June 2020,” the report said.
“The stabilization in the ISM manufacturing index…, provides some further reassurance that the economy is not yet sliding into recession. While the details suggest manufacturing output could still contract over the next few months, the headline index is consistent with GDP growth of nearly 2% annualized,” said Andrew Hunter, senior U.S. economist at Capital Economics.
