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Gold Suffers as ISM Manufacturing Index Shines

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Gold falls on strong ISM Manufacturing Index

As of 11:00 AM ET today, the SPDR Gold Trust ETF (GLD) was down 0.6%. Gold prices were already under pressure due to the US dollar’s (UUP) strength as US–China (FXI) trade dispute escalations linger. The steeper decline in gold is attributed to the better-than-expected reading of the ISM (Institute of Supply Management) Manufacturing Index. The manufacturing index rose to 61.3 in August from 58.1 in June. The data point also soundly beat expectations, as economists were expecting 57.2. This value is also the highest for this gauge since May 2004. A reading of above 50 implies economic expansion.

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US economic expansion continues

New orders jumped from 60.2 to 65.1 while production climbed to 63.3 from 58.5 in the previous month. Prices, on the other hand, declined to 72.1 from 73.2.

Since the report suggests a healthy US economy, the US dollar rose, which weighed on gold prices. The market might also infer the report to mean that trade tensions haven’t started weighing on US business prospects. On stronger growth prospects, US ten-year Treasury yields (TLT) also improved, which also weighed on gold’s prospects.

US dollar strengthens

The PowerShares DB US Dollar Index Bullish (UUP) was trading 0.56% higher. US stock markets pared some losses on the strong manufacturing gauge but were still trading with losses on concerns of escalating trade war tensions. The S&P 500 (SPY), the Dow Jones Industrial Average Index (DIA), and the NASDAQ Composite (QQQ) were trading with losses of 0.12%, 0.13%, and 0.27%, respectively.

For more on gold’s outlook, see Is It a Good Time to Look at Gold?

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