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(Kitco News) - The gold market continues to trade on either side of $2,000 as the U.S. manufacturing sector continues to lose momentum.
Friday, the Commerce Department said that U.S. durable goods orders dropped 1.0% last month, following January's revised 5% decline. The data was weaker than expected; consensus expectations compiled by various news organizations called for durables to increase by 0.4%.
The report noted this was the fourth consecutive drop in durable goods orders.
Meanwhile, core durable goods, which excludes the volatile transportation sector, were unchanged last month, following January's revised increase of 0.4%. Economists were expecting to see a 0.2% rise.
Capital goods orders, excluding defense spending and the transportation sector, increased 0.2% in February. The data was slightly better than expected, as economists were looking for an unchanged reading. However, the report also noted a sharp revision, with January seeing a 0.3% increase compared to the previous estimate of 0.8%.
"Core orders were a tad stronger, but the magnitude of the revision erases any of the good news, and more," said Adam Button, chief currency strategist at Forexlive.com.
The gold market has been firing on all cylinders in the last two weeks as safe-haven demand due to the global banking crisis has pushed prices to a one-year high at $2,000 an ounce. At the same time, disappointing economic data is also supporting gold prices as many expect a weaker economy will force the Federal Reserve to end its tightening cycle.
The gold market is holding relatively steady in initial reaction to the latest economic data. April gold futures last traded at $1,998.70 an ounce, up 0.17% on the day.
Andrew Hunter, deputy chief U.S. economist at Capital Economics, said that the latest manufacturing data continues to show the U.S. is creeping towards a recession.
“The 1.0% m/m fall in durable goods orders in February indicates that business equipment investment was continuing to weaken even before the banking turmoil arose. With business confidence likely to have taken a hit in recent weeks and banks tightening lending standards further, we suspect business investment has further to fall,” he said. “We expect the weakness in equipment investment to intensify from here, which is likely to help drag the wider economy into recession soon.”
