Storm clouds gather! Unexpectedly weak US data delivers a blow to the dollar, while massive buy orders send gold soaring.
Data released Monday (May 3) by the Institute for Supply Management (ISM) showed a slight slowdown in manufacturing momentum. The ISM Manufacturing PMI for April came in at 60.7, below expectations and the previous month's reading. Following the data release, the US 10-year Treasury yield fell below 1.6%, and the US Dollar Index dipped below 91. Gold prices accelerated upward, nearing $1800 per ounce, rising more than $30 from its daily low. US equities showed mixed results, with the Dow Jones Industrial Average rising 300 points or more than 0.8%, while the Nasdaq fell 0.3%. This week, the market is closely watching statements from Federal Reserve Chairman Powell and the April jobs report.
Time:
2021-05-04 09:36
Data released Monday (May 3) by the Institute for Supply Management (ISM) showed a slight slowdown in manufacturing momentum, with the ISM Manufacturing PMI index for April coming in at 60.7, below expectations and the previous month's reading. Following the data release, the US 10-year Treasury yield fell below 1.6%, and the US dollar index fell below 91; gold prices accelerated to just below $1800 per ounce, rising more than $30 from its daily low; and US stocks were mixed, with the Dow Jones rising 300 points or more than 0.8%, while the Nasdaq fell 0.3%. This week, the market is closely watching Federal Reserve Chairman Powell's speech and the April non-farm employment report.
The Institute for Supply Management (ISM) said Monday that the ISM Manufacturing PMI index for April was 60.7, down from 64.7 in March. The data fell short of expectations, with the market generally expecting it to be around 65.0.
"The manufacturing economy continued to expand in April. Survey Committee members reported that their companies and suppliers continued to struggle to meet growing demand due to the impact of the coronavirus on the supply of parts and materials," said Timothy Fiore, chair of the ISM Manufacturing Survey Committee, in a report.
"Record-long lead times, widespread shortages of key basic materials, rising commodity prices, and difficulties in transporting products continued to affect all sectors of the manufacturing economy. Worker absenteeism, short-term shutdowns due to parts shortages, and difficulty filling open positions continued to constrain the manufacturing sector's growth potential."
Forexlive commented that the current shortage of electronics and semiconductors is having a huge impact on lead times and prices. In addition, prices across most supply lines appear to be generally rising.
Another report released earlier showed that the final US Markit Manufacturing PMI for April was 60.5, slightly below the expected 60.7 and the previous month's 60.6.
Chris Williamson, chief business economist at IHS MARKIT, noted that US manufacturing experienced its biggest boom in at least 14 years in April. Demand surged at an unprecedented rate in 11 years as hopes for recovery grew and new stimulus measures were introduced.
He added: "However, supply chain delays worsened, reaching the highest level on record in the survey, leading to production bottlenecks at many companies. Consumer-facing businesses were hardest hit, with production falling short of order growth in the past two months due to insufficient inputs, reaching record levels due to the surge in household spending."
The April jobs report will be released on Friday, and the market is pinning high hopes on this number.
Economists say that after adding 916,000 jobs in March, April's job numbers are likely to reach 1 million. Jefferies economists' estimates range from around 700,000 to 2.1 million.
According to Dow Jones, economists surveyed generally expect the unemployment rate to fall from 6% to 5.8%, with an increase of 978,000 jobs.
Federal Reserve Chairman Powell said last week that the Fed is still seeking "substantial further progress" toward its economic goals, so the Fed's remarks are also important.
Powell stressed that the Fed is not close to tapering its bond-buying program, which surprised some investors. Some bond market experts had previously expected the Fed to begin discussing tapering at its June meeting and to begin reducing its $120 billion monthly bond purchases by the end of the year or early next year.
Peter Boockvar, chief investment officer at Bleakley Advisory Group, said last week, "The focus next week is on the jobs data, because as one of the Fed's moves to achieve 'substantial progress,' we'll see next Friday how far they've come on that path." The Fed's mandate is to pursue full employment and a stable pace of inflation, with a target of 2%.
In addition, wage data is also worth watching. Bart Melek, global strategy head at TD Securities, told Kitco News: "Wage data is very important. Generally speaking, any unexpected increase will push up inflation expectations. This could depress real interest rates, which would be a good catalyst for gold."
After the release of the US ISM data, the 10-year US Treasury yield fell below 1.6%, and the US dollar index fell below 91, reaching a low of 90.87.
Adam Button, an analyst at Forexlive, pointed out that the dollar's rally last Friday is rapidly unwinding, and the decline accelerated after the ISM manufacturing survey results fell short of expectations. From the details of the survey, if the conclusion is that demand is slowing, I tend to think the market has misread it. Every comment in the survey indicates strong demand, but supply chain problems are intensifying due to material shortages, especially semiconductors.
Spot gold's gains widened to 1.5%, hitting a high of $1797.90 per ounce, up $32 from its daily low, and breaking above the $1790 per ounce level for the first time since April 23.
Spot silver continued to rise, with gains widening to 4%, currently at $26.91 per ounce; COMEX silver broke above $27 per ounce, up 4.63%.
Data shows that the most active gold futures contract on COMEX traded 2232 lots in one minute at 22:00 Beijing time on May 3, with a total contract value of $400 million.
"Bond yields remain moderate, the dollar is under pressure, the fiscal and monetary stimulus in the market... all these factors continue to push gold and silver prices higher," said David Meger, market trading manager at High Ridge Futures.
"We're in an environment of rising inflation, and we've seen a lot of stimulus... In this environment, it's understandable that commodity prices are expected to perform quite well."
US stocks rose on Monday, the first trading day of May, with stocks related to economic reopening continuing to rise.
The Dow Jones index rose 300 points, the S&P 500 rose 0.6%, and the Nasdaq Composite fell 0.3%.
Spot silver continued to rise, with gains widening to 4%, currently at $26.91 per ounce; COMEX silver broke above $27 per ounce, up 4.63%.
Data shows that the most active gold futures contract on COMEX traded 2232 lots in one minute at 22:00 Beijing time on May 3, with a total contract value of $400 million.
"Bond yields remain moderate, the dollar is under pressure, the fiscal and monetary stimulus in the market... all these factors continue to push gold and silver prices higher," said David Meger, market trading manager at High Ridge Futures.
"We're in an environment of rising inflation, and we've seen a lot of stimulus... In this environment, it's understandable that commodity prices are expected to perform quite well."
US stocks rose on Monday, the first trading day of May, with stocks related to economic reopening continuing to rise.
The Dow Jones index rose 300 points, the S&P 500 rose 0.6%, and the Nasdaq Composite fell 0.3%.
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