Gold prices are see a modest boost Monday following a drop in momentum in the U.S. manufacturing sector, according to the latest data from the Institute for Supply Management (ISM).
The ISM said its Purchasing Managers Index weakened in April, falling to a reading of 54.8%, following March’s reading of 57.2%.
According to consensus forecasts, economists were expecting to see a modest fall to 56.6%. 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.
Ahead of the report, gold was trading in negative territory with the market rallying back to unchanged levels following the data. June Comex gold futures last traded at $1,268 an ounce.
After last week’s disappointing gross domestic product report, which showed that the U.S. economy grew by 0.7% in the first quarter, economists say they will be paying close attention to second quarter data to see if the weak growth trend will continue.
The components of the report showed mixed strength in the manufacturing sector. The New Orders Index fell to 57.5% in April, compared to March’s reading of 64.5%. At the same time the Production Index rose to 58.6%, up 1 percentage point from March.
Looking at the labor market, the Employment Index dropped to 52%, down 6.9 percentage points compared to March’s reading of 58.9%.
Inflation was relatively benign last month with the Prices Index falling to 68.5%, down from the previous reading of 70.5%.
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