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Gold Futures Settle Above $1,100 as Manufacturing Data Boosts Sentiment

Strategic Insights

— 1 min read

Stronger-than-expected US manufacturing data has bolstered sentiment for riskier assets like metals and equities, pushing gold futures above the $1,100 an ounce mark. The April gold contract rose 2% to settle at $1,105 an ounce on the Comex division of the New York Mercantile Exchange, with the Institute for Supply Management's index of manufacturing activity moving to 58.4 in January, its best reading since August 2004. This reading indicates growth, and economists had expected the index to come in at 55.3. The inflationary implications of the data also helped gold, as the metal is often viewed as an inflation hedge.

Key Takeaways:

  • Gold futures settled above $1,100 an ounce on the Comex division of the New York Mercantile Exchange, with the April contract rising 2% to settle at $1,105 an ounce.
  • The Institute for Supply Management's index of manufacturing activity moved to 58.4 in January, its best reading since August 2004, indicating growth.
  • Economists had expected the index to come in at 55.3, and the inflationary implications of the data helped gold as it is often viewed as an inflation hedge.
  • Analysts such as Sterling Smith and Bob Haberkorn attributed the bullish sentiment to the risk appetite of investors, who are shifting their money from low-interest assets to riskier commodities, equities, and high-yielding currencies.
  • The Dow Jones Industrial Average was up 103.38 points, or 1%, at 10,170.71 shortly after gold closed, indicating a positive correlation between gold and equities.
  • Ultra-low interest rates have decreased the opportunity cost of owning gold, and emergency liquidity injected into the markets by governments has raised investors' spending ability, contributing to commodities, equities, and high-yielding currencies investments.

Statistics:

  • The Institute for Supply Management's index of manufacturing activity moved to 58.4 in January, its best reading since August 2004.
  • The April gold contract rose $21.20, or 2%, to settle at $1,105 an ounce on the Comex division of the New York Mercantile Exchange.
  • The Dow Jones Industrial Average was up 103.38 points, or 1%, at 10,170.71 shortly after gold closed.

Sources:

  • Dow Jones Commodities News via Comtex
  • The Institute for Supply Management
  • Country Hedging (Sterling Smith)
  • Lind-Waldock (Bob Haberkorn)

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