It seems that gold is having a hard time staying above $1,800. One of the main reasons is the mediocre result on US production in January.
On Tuesday, the Institute for Supply Management (ISM) reported that the manufacturing index fell to 57.6% in January, slightly lower than the 58.7% in December. But this decline was not a surprise as economists already expected it. Apparently, even though manufacturing activity remained stable last month, there was a sharp rise in inflationary pressures, which prompted the price index to increase to 76.1%.
ISM chairman Timothy Fiore said the sector continues to be driven by demand and tight supplies, but January was the third month that showed signs of improved workforce and supplier efficiency. There was, however, some shortage in critical intermediate materials, as well as difficulties with the transportation of products and a shortage of labor in factories.
Looking at other components of the report, new orders fell to 57.9%, from 61% in December. The production index also lost 57.8%, from 59.4% a month earlier.
On the bright side, the labor market is progressing smoothly, with the employment index rising to 54.5%, from 53.9% in December.
Andrew Hunter of Capital Economics said these reports bode well for future activity.
But there is no doubt that the US is facing a shortage of manufacturing capacity, which could slow global economic growth. There are also a number of reasons why a decline in production growth can be expected in the coming months.
