ISM Manufacturing Index disappoints, but gold price focused on bond yields

(Kitco News) Gold edged down as the headline manufacturing index from the Institute for Supply Management disappointed in March. The precious metal remained focused on rising bond yields.

The ISM manufacturing index was at 57.1% last month versus the consensus forecast of 59%. The monthly figure also marked a 1.5 percentage-point increase from February’s reading of 58.6%.

“This figure indicates expansion in the overall economy for the 22nd month in a row after a contraction in April and May 2020. This is the lowest reading since September 2020 (55.4 percent),” the report said.

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.

Following the release, gold prices posted additional losses, with June Comex gold futures last trading at $1,932.70, down 1.09% on the day. Kitco’s senior analyst Jim Wyckoff noted that gold’s primary drivers from Friday were rising US Treasury yields and a firmer US dollar index.

The employment index rose to 56.3% in March, up 3.4 percentage points from the previous month’s reading. The index for new orders decreased to 53.8% from 61.7%, while the production index declined to 54.5% from 58.5%.

The US manufacturing sector continues to experience high demand amid supply-chain constraints, the report noted.

“In March, progress was made to solve the labor shortage problems at all tiers of the supply chain, which will result in improved factory throughput and supplier deliveries … Amid signs of staffing and supplier delivery improvements, production expanded at disappointing levels, likely due to timing issues,” said Timothy Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee.

After digesting the report, economists said that despite some easing in March, the manufacturing levels in the US were still seeing healthy growth. “The supplier deliveries measure also eased off, suggesting that supply chain issues did not become more widespread despite the war in Ukraine and lockdowns in China. However, that impact will likely be captured in the subsequent month’s survey,” said CIBC Capital Markets senior economist Katherine Judge.

Live 24 hours gold chart [Kitco Inc.]

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