Gold Remains Under Pressure Despite Disappointing ISM Numbers
(Kitco News)- Gold prices continue to hover near a four-month low even asmomentum in the manufacturing sector continues to fade, according to the latestdata from the Institute for Supply management (ISM)
Tuesday, the ISM said its manufacturing index showed a reading of 57.3% forApril, down from March's reading of 59.3%. The data was weaker than expected asconsensus forecasts were calling for a reading of 58.4%.
Thegold market has been ignoring most economic data as it is being weight down bysurging momentum in the U.S. dollar. June gold futures last traded at $1,307.70an ounce, down 0.86% on the day.
Thecomponents of the report showed broad-based weakness. The New Orders Indexshowed a reading of 61.2%, down from March’s reading of 61.9%; at the same timethe Production Index dropped to 57.2%, down from the previous level of 61%.
Themanufacturing labor market is also starting to lose momentum with theEmployment Index dropping to 54.2%, down from March’s reading of 57.3%.
Thereport also showed a strong rise in inflation pressures; The Prices Indexincreased 79.2% in April up from the previous reading of 78.1. The report notedthat inflation is at its highest level since April 2011.
Risingprice pressures is positive for gold as it is sees as a hedge against higherinflation.
Someeconomists are shrugging of the disappointing headline data noting that theindex is still in expansionary territory.
“The cooling in the ISM index is more in line with the sidewaystrend we've seen recently in core capital goods orders. That being said, wecontinue to expect tax reform, particularly related to the accelerateddepreciation of machinery and equipment will support factory activity thisyear,” said Katherine Judge, senior economist at CIBC World Markets.
By Neils ChristensenFor Kitco News
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