(Kitco News) – The gold market continues to push back towards $1,800 an ounce as the U.S. manufacturing sector sees weaker than expected growth in June, the Institute for Supply Management (ISM).
Friday, the ISM said that its manufacturing Purchasing Managers Index dropped to a reading of 53%, down from May’s reading of 56.1. The data missed expectations as economists were looking for a decline to 54.6%.
The report said this is the lowest PMI reading since June 2020.
““The U.S. manufacturing sector continues to be powered — though less so in June — by demand while held back by supply chain constraints,” said Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, in the report.
The gold market has been seeing solid technical selling pressure after falling through $1,800 an ounce in overnight action; however, the disappointing economic data from the U.S. is helping the precious metal retrace some of its losses. August gold futures last traded at $1,795.70 an ounce, down 0.64% on the day.
Looking at some of the components of the index, the report said that the New Orders Index dropped to 49.2%, down from the previous level of 55.1%. At the same time, the Production Index dropped to a reading of 54.9%, down from May’s reading of 54.2%.
The report also highlighted a further contraction in in the labor market. The Employment Index dropped to a reading of 47.3%, down from May’s reading of 49.6%.
It’s not just manufacturing that is losing momentum. The report highlighted a drop in inflation pressures, which could be seen as a negative for gold. The report said that the Prices Index fell to 78.5%, down from May’s reading of 82.2%.
Although the latest disappointing economic data raises the risk that the U.S. economy falls into a recession; however, Andrew Hunter, Senior U.S. Economist at Capital Economics, said that the U.S. economy has room to slow without triggering a recession.
“While the ISM index lends support to concerns that aggressive Fed tightening will drive a sharp slowdown in the economy, the details suggest that slowdown could result in a faster drop-back in inflation than many are now assuming,” he said.