The Precarious Path Of Gold: A Harsh Economic Reality Unfolds

(Kitco News) - The gold market is not finding much support as the U.S. manufacturing sector lost momentum in October.

Wednesday the Commerce Department said that U.S. durable goods orders fell 5.4% last month, following September’s revised increase of 4.0%. The data was weaker than expected; consensus expectations compiled by various news organizations called for durables to increase fall by 3.2%.

Meanwhile core capital goods orders, which excludes the transportation sector, was unchanged last month. The data also missed expectations, as economists were looking for a 0.2% increase. September’s data was also revised lower to 0.2%.

Core capital gooods, excluding non-defense spending and the transportation sector fell 0.1%, following September’s revised 0.2% decline.

The disappointing economic data is not having much impact on gold as prices continue to test support around $2,000 an ounce. December gold futures last traded at $1,999.60 an ounce, down 0.10% on the day.

Andrew Hunter, deputy chief U.S. economist at Capital Economics said that higher interest rates continue to impact capital investment for businesses. He added that these conditions will remain a drag on the manufacturing sector.

“The October durable goods orders data suggest that business equipment investment continues to struggle in the fourth quarter,” she said. “It's true that the recent drop-back in bond yields may provide some support for investment, but borrowing costs are likely to remain considerably higher than they were a couple of years ago for the foreseeable future. And with banks continuing to tighten lending standards too, there appears to be little chance of an imminent recovery.”

Originally published by: Neils Christensen on Kitco News