(Kitco News) - The gold market continues to see considerable bullish momentum near record highs as solid economic data as little impact on the precious metal.
Monday, the Institute for Supply Management (ISM) said its Services Purchasing Managers Index rose to 50.3 for March, compared to February’s reading of 47.8. The data was stronger than expected, as consensus forecasts looked for only a slight improvement to 48.5%.
“The U.S. manufacturing sector moved into expansion for the first time since September 2022. Demand was positive, output strengthened and inputs remained accommodative,” said Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee.
Although gold prices are down from their intra-day record highs, the market is still showing robust gains for the session. June gold futures last traded at $2,257.40 an ounce, up 0.82% on the day.
The report showed broad-based gains in its components. The New Orders Index increased to 51.4%, up from 49.2% reported in February. At the same time, the Production Index rose to 55.8%, up from the previous reading of 52.5%.
Meanwhile, the report also noted an improvement in the labor market, even as it remained in contraction territory. The Employment Index rose to 47.4%, up from 45.9%.
However, the improved activity comes at a cost. The report noted a rise in inflation pressures. The Price Index rose to 55.8, up from February’s reading of 52.5.
However, economists have noted that inflation is having little impact on the gold market as the Federal Reserve has signaled that it is comfortable lowering interest rates even as inflation remains above its 2% target.
Stephen Brown, Deputy Chief North America Economist at Capital Economics dismissed the higher inflation pressures.
“While the accompanying rise in the prices paid index to a 20-month high looks somewhat concerning for the Federal Reserve, that appears to largely reflect higher oil prices rather than a renewed rise in core goods inflation pressures,” he said.
Brown added that it appears that the U.S. manufacturing sector has finally turned the corner.
