(Kitco News) - Gold is trading above $3,130 per ounce after the latest data showed the U.S. manufacturing sector weakening beyond expectations last month.
The Institute for Supply Management (ISM) announced on Tuesday that its Manufacturing Purchasing Managers Index declined to 49.0 in March after it posted a 50.3 reading in February. The headline number was worse than expected, as consensus forecasts looked for an unchanged reading of 50.3.
“In March, U.S. manufacturing activity slipped into contraction after expanding only marginally in February,” said Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee. “The expansion in both February and January followed 26 consecutive months of contraction. Demand and output weakened while input strengthened further, a negative for economic growth.”
Spot gold continued to trade near the middle of its range on the session in the minutes after the 10 am release. Spot gold last traded at $3,131.84 per ounce for a gain of 0.26% on the day.
The report’s components showed worsening across the board. The ISM noted a sharp rise in inflation pressures, with the Price Index shooting up to 69.4 against expectations for a 65 reading and following February’s 62.4 level. At the same time, the Production Index fell to 48.3, 2.4 points lower than February’s 50.7 reading.
The New Orders Index fell to 45.2, well below the 48.5 level expected and down from the 48.6 reported in February. The ISM also noted a decline in the labor market, with the Employment Index falling to 44.7, below expectations for a 47.5 reading and down from 47.6 the previous month.
“Demand and production retreated and destaffing continued, as panelists’ companies responded to demand confusion,” Fiore said. “Prices growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth. Forty-six percent of manufacturing gross domestic product (GDP) contracted in March, up from 24 percent in February. The share of manufacturing sector GDP registering a composite PMI calculation at or below 45 percent (a good barometer of overall manufacturing weakness) was 7 percent in March, a 5-percentage point increase compared to the 2 percent reported in February.”
