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(Kitco News) – The gold market continues to slide towards $1,800 an ounce as the US manufacturing sector sees weaker-than-expected growth in June, according to the Institute for Supply Management (ISM).
Friday, the ISM said its manufacturing PMI fell to a reading of 53%, down from the May reading of 56.1. The data missed expectations as economists had been looking for a drop to 54.6%.
This is the lowest reading of the PMI since June 2020, the report said.
“The US manufacturing sector continues to be supported – albeit less in June – by demand while declining due to supply chain constraints,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in the report.
The gold market witnessed strong technical selling pressure after falling to $1800 an ounce in overnight trading. However, disappointing economic data from the US is helping the precious metal offset some of its losses. August gold futures were trading at $1,795.70 an ounce, down 0.64% on the day.
Looking at some components of the index, the report said the new orders index fell to 49.2%, down from the previous level of 55.1%. Meanwhile, the production index rose 54.9%, down from May’s reading of 54.2%.
The report also highlighted a further contraction in the labor market. The employment index fell to a reading of 47.3%, down from the May reading of 49.6%.
It’s not just manufacturing that is losing momentum. The report highlighted declining inflation pressures, which can be considered negative for gold. The report stated that the price index fell to 78.5%, down from the May reading of 82.2%.
Although disappointing recent economic data increases the risk of the US economy falling into recession; However, Andrew Hunter, chief US economist at Capital Economics, said the US economy has room to slow down without causing a recession.
“While the ISM index supports fears that severe Fed tightening will lead to a sharp slowdown in the economy, the details suggest that the slowdown could cause inflation to decline faster than many now assume,” he said.
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