(Kitco News) – According to the latest data from the Institute for Supply Management (ISM), the gold market is retaining strong gains but is barely responding to weaker-than-expected sentiment in manufacturing.
On Tuesday, the ISM said its manufacturing index posted a reading of 57.5% for November, down from the October reading of 59.3%. The data was weaker than expected as the consensus forecast called for a reading of 57.9%.
Readings above 50% in these diffusion indices are considered a sign of economic growth and vice versa. The more an indicator is above or below 50%, the greater or smaller the rate of change.
The gold market is doing little to react to disappointing economic data, with prices holding gains of nearly 2% after rebounding from critical support. February gold futures last traded at $ 1,813 an ounce, up 1.8% on the day.
Looking at some of the report’s components, the new orders index fell to 65.1%, down from the October reading of 67.9%.
The report showed further weakness in the US labor market. The employment index fell to 48.4%, down from the previous reading of 53.2%.
“It’s a good report, but this drop in employment in contractionary territory is a little worrisome,” said Adam Button, chief currency strategist at Forexlive.com.
For gold prices, inflationary pressure remains high, with the price paid index falling to 65.4%, a tic lower than the October reading of 65.5%.
Katherine Judge, senior economist at CIBC, said the latest report suggests slowing demand is infecting the manufacturing sector, which has generally shown greater resilience during the pandemic.
“The uncertainty surrounding budget support is growing as some programs will expire at the end of this year, coinciding with the prospect of larger-scale closures, and suggesting that there may be short-term challenges for the manufacturing sector. , with a light shining on the horizon as we move closer to vaccine rollout, ”she said.
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