Two weaker-than-expected economic reports Wednesday has helped gold start the second quarter off on a strong footing, pushing prices briefly above $1,200 an ounce.
Wednesday, Comex June gold futures rallied to a session high of $1,203.60 an ounce. Although prices have backed down slightly they are still holding on to recent gains, last trading at $1,199.10 an ounce, up more than 1% on the day.
“The market need to close above $1,200 to create some momentum,” said George Gero, vice president and precious-metals strategist for RBC Capital Markets Global Futures.
Gold’s rally started early in the session after private payrolls processor ADP said that 189,000 jobs were created in March, well below the consensus of 225,000 jobs. According to the report, this was the weakest pace of job growth since January 2014.
Gold got a second push, driving prices above $1,200 an ounce, following disappointing manufacturing data from the Institute for Supply Management (ISM).
ISM said its Purchasing Managers Index showed a reading of 51.2% in March, below the consensus of 52.5%. The data shows that the manufacturing sector has been steadily losing momentum since the start of the year.
Gero added that the data pushed back expectations of when the Federal Reserve will hike rates, with more focus now on a September liftoff.
John Weyer, co-director of commercial hedging at Walsh Trading, agreed that this data raises doubt about a June rate hike.
“It is amazing how quickly things can change from report to report,” he said. “There is a lot more focus on the data and the general consensus I think is switching to a September rate hike because of the weak data,” he said.