Gold Prices Tick Higher Following Latest Manufacturing Data

The ISM Manufacturing Index was released ahead of Wednesday’s trading session, beating expectations with a 49.1% reading for the month of March after analysts were expecting to see a reading of 45%. While the reading may not yet show the full impact of the coronavirus pandemic, the uncertainty is fueling safe havens like gold, which ticked higher.

“The coronavirus pandemic and shocks in global energy markets have impacted all manufacturing sectors … Transportation Equipment and Petroleum & Coal Products are the weakest sectors. Sentiment regarding near-term growth this month is strongly negative, by a 2-to-1 ratio,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

Gold prices will push even higher when the reading for April could show the full-blown effects of the coronavirus outbreak having a negative impact on manufacturing.

“The main reason for the only modest decline in the composite index was because the measure of suppliers’ delivery times moved up, although that lengthening of lead-times clearly isn’t a good thing in this instance. Because of these details and the further weakening of the economy seen since the majority of replies likely came in, we would expect the headline print to weaken markedly next month towards the 42.8 mark that the ISM says has historically been consistent with U.S. recessions,” said Andrew Grantham, senior economist with CIBC Capital Markets.

Right now, gold is looking to break out of the $1,600 ~ $1,650 per ounce level:

Gold Price in US Dollars Chart

Gold Price in US Dollars data by YCharts

Consumer Confidence Dips

It’s no surprise that consumer confidence dipped during the month of March as the coronavirus pandemic still has a tight grip on the global markets. However, despite this lower confidence, gold was unable to capitalize, but the uncertainty surrounding the effects of the virus still favors the precious metal.

“Consumer confidence declined sharply in March due to a deterioration in the short-term outlook,” said Lynn Franco, senior director of economic indicators at The Conference Board. “The intensification of COVID-19 and extreme volatility in the financial markets have increased uncertainty about the outlook for the economy and jobs. March’s decline in confidence is more in line with a severe contraction – rather than a temporary shock – and further declines are sure to follow.”

Per a CNBC report, “Goldman Sachs economists expect the U.S. economy to contract by 34% in the second quarter and U.S. unemployment to surge to 15% before the fastest-ever recovery takes place. The S&P 500 has tumbled more than 20% from record levels seen in late February.”

Investors looking to get gold exposure can look at funds like SPDR Gold Shares (NYSEArca: GLD)  and the SPDR Gold MiniShares (NYSEArca: GLDM). Precious metals like gold offer investors an alternative to diversify their holdings, and like other commodities, gold will march to the beat of its own drum compared to the broader market.

Traders looking for leverage can use funds like the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT), VanEck Vectors Gold Miners (NYSEArca: GDX)and the Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG).

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