(Kitco News) – The gold market continues to hold gains above $2,050 an ounce but is not seeing any significant bullish momentum, even as the U.S. manufacturing sector lost further momentum since the start of the year.
Friday, the Institute for Supply Management (ISM) said its manufacturing index dropped to 47.8% for February, compared to January’s reading at 49.1. The data was weaker than expected as consensus forecasts looked for a slight improvement to 49.5.
“The U.S. manufacturing sector continued to contract (and at a faster rate compared to January), with demand slowing, output easing and inputs remaining accommodative,” said Timothy R. Fiore, CPSM, C.P.M., Chair of the ISM Manufacturing Business Survey Committee, in the report.
Readings above 50% in such diffusion indexes signify economic growth and vice-versa. The farther an indicator is above or below 50%, the greater or smaller the rate of change.
Gold prices have managed to hold gains above an important resistance point; however, it is struggling to attract significant follow-through buying. April gold futures last traded at $2,060.50 an ounce, up 0.28% on the day.
The components of the report showed broad-based weakness in the U.S. manufacturing sector. The report said that the New Orders Index dropped to 49.2, down from January’s reading of 52.5; at the same time, the Production Index fell to 48.4, down from the previous reading of 50.4.
The report also highlighted weakening momentum in the labor market. The Employment Index dropped to 45.9, down from January’s reading of 47.1.
The report also noted that inflation pressures appear to be stabilizing. The Prices Index was relatively unchanged at 52.5, down slightly from 25.9 reported in January.
Some analysts have said that the disappointing manufacturing data could create some safe-haven demand for the precious metal as it highlights the threat of the economy falling into a recession.
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