Gold surged above a 7-year high on Tuesday before pulling back slightly, staying on highs following above-expectation results for the December ISM non-manufacturing PMI. The PMI rose to 55 last month from 53.9 the month before, beating forecasts of 54.5.
Key Takeaways
- The ISM non-manufacturing PMI rose from 53.9 to 55, above expectations of 54.5.
- The US dollar ticked upward following the news even as gold soars above a 7-year high.
- The upward trend was led by gains in business activity which rose to 57.2.
Gains in the ISM non-manufacturing PMI were led by increased business activity which rose from 51.6 to 57.2. Inventories rose half a percentage point to 51, while the prices index remained flat at 58.5. Employment fell from 55.5 to 55.2, and new orders fell from 57.1 to 54.9. Overall, non-manufacturing activity in the US economy expanded in December, although the headline figure ignores the decline in a majority of the index components.
#US ISM non-manufacturing PMI (Dec) 55.0 v 54.5 exp. (prev 53.9)
Highest since August$USD pic.twitter.com/VCBoapa9Lj
— Michael Brown (@MrMBrown) January 7, 2020
The gain in business activity can be taken as a positive step forward following months of contraction in business investment, largely a result of the tensions and uncertainty created by the US/China trade war. With a tentative trade agreement now in place, the outlook for business activity and business investment may be improved.
Expert Outlook
Commenting on the data, "the non-manufacturing sector had an uptick in growth in December," noted Anthony Nieves, Chair of the Institute for Supply Management (ISM) Non-Manufacturing Business Survey Committee. "The respondents are positive about the potential resolution on tariffs. Capacity constraints have eased a bit; however, respondents continue to have difficulty with labor resources."
Market Reaction
Gold prices soared above a 7-year high today. Spot gold last traded at $1,568.42.13/oz, up 2.88% with a high of $1,571.10/oz and a low of $1,556.28/oz. Gold has been rallying since yesterday, likely bolstered due to the geopolitical uncertainty surrounding the US assassination of a prominent Iranian general in Iraq.
Gold Price Chart
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