(Kitco News) - Gold prices, already near session highs, are getting a modest boost from disappointing sentiment data from the U.S. manufacturing sector, according to the latest report from the Institute for Supply Management (ISM).
Friday, the ISM said its manufacturing index showed a reading of 47.2% for December down from November’s reading of 48.1%. The data was much weaker than expected as consensus forecasts were calling for a reading of 49.0%.
Readings above 50% in such diffusion indexes are seen as a sign of economic growth, and vice-versa. The farther an indicator is above or below 50%, the greater or smaller the rate of change.
Sentiment in the manufacturing sector is now at its lowest point since July 2009. The index has been in contraction territory for the last five months has has missed economist expectations for the last six consecutive months.
Gold prices have been trending higher most of the morning as markets have been jittery because of growing geopolitical fears following the news that U.S. military airstrikes killed Qassem Soleimani, commander of Iran's elite Quds Force. The latest econmic data is providing more momentum for the safe-haven precious metal. February gold futures last traded at $1,551.70 an ounce, up 1.56% on the day.
Not only does the headline data point to further contraction in the manufacturing sector but the reported showed broad-based weakness.
The report said that the New Orders Index dropped to a reading of 46.8 points, down from November’s reading of 47.2%; meanwhile, the production index dropped to a reading of 43.2%, down from the previous level of 49.1%.
The manufacturing labor market also lost momentum last month with the Employment Index falling to 45.1%, down from November’s reading of 46.6%.
Also positive for gold is the fact that inflation pressure appear to be rising. The Prices Index increased sharply to 51.7%, up from November’s reading of 46.7%.
“Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China,” said Timothy Fiore, Chair ISM Manufacturing Business Survey Committee in the report.
