(Kitco News) - The gold market is seeing some modest buying momentum as investors buy the dip after last week’s selloff. Analysts note that the precious metal could continue to benefit from stagnating economic activity and rising inflation.
The Institute for Supply Management (ISM) announced on Monday that its Manufacturing Purchasing Managers Index was relatively unchanged at 50.3% in February, compared to the previous reading at 50.9. The headline number was slightly weaker than expected.
However, the report showed a surprising surge in inflation. The Price Index jumped to 62.4%, up from January’s reading of 54.9%. Economists were looking for a more modest increase to 56.2%.
Inflation in the manufacturing sector rose to its highest level since June 2022.
“U.S. manufacturing activity expanded marginally for the second month in a row in February after 26 consecutive months of contraction. Demand weakened, while output stabilized and inputs, for the first time in several months, contributed to PMI growth,” said Timothy R. Fiore, CPSM, C.P.M., Chair of the ISM Manufacturing Business Survey Committee in the report.
The gold market is not reacting strongly to the latest disappointing economic data, as prices hold near session highs. Spot gold last traded at $2,878.90 an ounce.
Analysts have said that gold prices remain well supported as inflation pressures increase, threatening economic activity.
According to the survey results, a potential trade war, as the U.S. prepares to impose tariffs on imports from Canada and Mexico, is creating some uncertainty in the manufacturing sector.
The report's components showed broad-based declines. The New Orders index dropped to 48.6%, down from January’s reading of 55.1. At the same time, the Production Index dropped to 50.7%, down from January’s reading of 52.5%.
The report also noted a sharp drop in the labor market. The Employment Index fell to 47.6%, down from the previous reading of 50.3%.
