Spot gold bumps up against $4,100/oz after ISM Manufacturing PMI falls to 53.3

The Institute for Supply Management (ISM) announced on Wednesday that its Manufacturing Purchasing Managers Index fell to 53.3 in June, after posting a reading of 54 in May, its highest reading since May of 2022. The headline number was lower than expected, as consensus forecasts looked for a hold at 54.

“In June, U.S. manufacturing activity remained in expansion territory, growing at a slightly slower pace as compared to the month before,” said Susan Spence, Chair of the ISM Manufacturing Business Survey Committee. “Of the five subindexes that make up the PMI®, the New Orders and Production indexes grew slower as compared to the previous month, the Supplier Deliveries Index slowed at a slower rate, and the Employment and Inventories indexes improved with the latter entering expansion territory.”

Spot gold shot to a session high of $4,108.20 just before the 10 a.m. ET release, and last traded at $4,094.56 per ounce for a gain of 2.17% on the day.

The components of the report showed a mixed picture in key areas, with New Orders and Employment improving even as Production declined, while Prices moderated further.

“The New Orders Index expanded for the sixth consecutive month after four straight readings in contraction, registering 56 percent, down 0.8 percentage point compared to May’s figure of 56.8 percent,” Spence noted. “The June reading of the Production Index (52.2 percent) is 2.1 percentage points lower than May’s reading of 54.3 percent. The Prices Index remained in expansion (or ‘increasing’ territory), registering 73 percent, a 9.1-percentage point decrease from May’s reading of 82.1 percent. The Backlog of Orders Index registered 50.5 percent, down 1.7 percentage points compared to the 52.2 percent recorded in May. The Employment Index registered 49.7 percent, up 1.1 percentage points from May’s figure of 48.6 percent.”

Jeffrey Roach, Chief Economist at LPL Financial, told Kitco News that the rise in New Orders and Backlog of New Orders in June’s ISM Manufacturing report supports the growth trajectory for the balance of this year.

"Manufacturing demand improved at the margin in June but the rise in demand didn’t translate into an improvement into the employment situation," he noted. "We see downside risk for tomorrow's payroll report."

Roach also pointed out a significant comment from the energy sector: "According to conversations with the Institute of Supply Management, some business leaders in the energy industry reported that management is expecting to go back to February pricing structures since the spike in oil prices were driven by geopolitical stress and not regular market factors."

"We expect nonfarm payrolls grew roughly 85,000 in June as more consumers reported jobs are hard to get and businesses are not adding to payrolls as quickly as previous years," Roach concluded. "Further, FOMC chair Kevin Warsh will likely remain hawkish in tone but will keep rates unchanged at the July 29 meeting."