By Kitco News
Thursday August 18, 2016 08:35
(Kitco News) - The gold market is shrugging off slightly better than expected U.S. economy data that shows building momentum in the manufacturing sector and a stronger-than-expected labor market.
Thursday, the Philadelphia Federal Reserve said its manufacturing business outlook survey rose to 2 in its August reading, up from a negative 2.9 reading in July. According to consensus forecasts, economists were expecting to see a rise 1.4.
December gold futures were showing modest gains ahead of the report and have remained relatively unchanged following the data; December gold last traded at $1,355.30 an ounce, up 0.49% on the day.
Although the headline number was better than expected, the report highlighted continued weakness within the manufacturing sector, noting that this is only the third positive reading in the survey this year.
“The diffusion index for current general activity moved from a negative reading to a marginally positive reading, while the indicators for new orders and employment suggested continued general weakness in business conditions,” the report said.
Gold is also ignoring a bigger-than-expected drop in weekly jobless claims. At the same time as the Philly Fed data, the U.S. Labor Department said initial jobless claims, for the week ending Aug 13, fell by 4,000 claims to 262,000, down from the previous week’s reading of 266,000 claims. Economists were expecting to see a reading of 269,000.
According to some analysts instead of focusing on Thursday’s data, gold is reacting to the minutes from the July Federal Open Market Committee meeting, released Wednesday. According to some comments, the markets are now determining that the minutes were dovish as the committee was split on whether and when to raise interest rates.
Currency analysts at Brown Brothers Harriman noted that the U.S. dollar has sold off in the wake of the FOMC minutes, which is positive for gold prices, because markets were expecting a much stronger hawkish slant. The analysts described the tone of the minutes as “balanced.”
