Spot gold trades near $4,233/oz after ISM Manufacturing PMI falls to 48.2

The Institute for Supply Management (ISM) announced on Monday that its Manufacturing Purchasing Managers Index fell to 48.2 in November after posting a 48.7 reading in October. The headline number was lower than expected, as consensus forecasts looked for a reading of 48.6.

“In November, U.S. manufacturing activity contracted at a faster rate, with pullbacks in supplier deliveries, new orders and employment leading to the 0.5-percentage point decrease of the Manufacturing PMI,” said Susan Spence, Chair of the ISM Manufacturing Business Survey Committee. “Continuing a recent trend, a previous month’s improvement in one index was evident in another gauge. After new orders strengthened in August, production improved in September. An improvement in the Backlog of Orders Index in October transferred to the Production Index, which expanded in November (as backlogs pulled back). However, the New Orders and Employment indexes both dipped 2 percentage points, underscoring the ongoing economic uncertainty.”

Spot gold continued to trade near the lower end of its range on the session in the minutes after the 10 am EDT release. Spot gold last traded at $4,233.06 per ounce for a gain of 0.41% on the day.

The components of the report showed deterioration in most key areas. The ISM noted an uptick in inflation pressures, with the Price Index rising to 58.5 from 58 in October, while the New Orders Index dropped to 47.4, down from the 49.4.

The ISM also noted weakening in the labor market, with the Employment Index falling to 44 from 46 the previous month, while the Production Index rose to 51.4 from October’s 48.2 percent reading.

“The Supplier Deliveries Index indicated faster delivery performance after three consecutive (and 14 of the previous 16) months in ‘slower’ territory,” Spence said. “The reading of 49.3 percent is down 4.9 percentage points from the 54.2 percent recorded in October. The Inventories Index registered 48.9 percent, up 3.1 percentage points compared to October’s reading of 45.8 percent.”

“The New Export Orders Index reading of 46.2 percent is 1.7 percentage points higher than the reading of 44.5 percent registered in October,” she added. “The Imports Index registered 48.9 percent, 3.5 percentage points higher than October’s reading of 45.4 percent.”

“Regarding output, production jumped into expansion, but employment contracted at a faster pace, as 67 percent of panelists (the same as October) indicated that managing head counts is still the norm at their companies, as opposed to hiring,” Spence noted. “Finally, inputs (defined as supplier deliveries, inventories, prices and imports), were mixed, with the Supplier Deliveries Index indicating faster deliveries, the Inventories Index contracting at a slower rate, and the Prices Index continuing to reflect increases. The Imports Index contracted at a slower rate.”