Gold futures closed above $1,400 an ounce on Monday, lifted by a weaker dollar in the wake of data showing a contraction in U.S. manufacturing in May.
Gold prices recouped nearly everything they lost on Friday with the weak manufacturing data easing concerns about a pullback in the Federal Reserve’s bond-purchase program, which has been supportive for gold.
Gold for August delivery GCQ3 0.00% rose $18.90, or 1.4%, to settle at $1,411.90 an ounce on the Comex division of the New York Mercantile Exchange.
On Friday, gold prices fell $19 an ounce after better-than-expected data about manufacturing activity in the Chicago area, and after a gauge on U.S. consumer sentiment in May reached the highest level since 2007.
Data Monday showed that the Institute for Supply Management’s index fell to 49.0% last month from 50.7% in April. That marked the first contraction since November.
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The weaker-than-expected ISM is “another example of mixed data which is leading the lack of clear direction and timing” from the Federal Reserve to curtail or cease quantitative easing, said Jeffrey Wright, managing director at Global Hunter Securities.
Other examples of mixed data included reports from China and Europe.
China experts weighed conflicting data on the nation’s manufacturing sector, with HSBC reporting Monday that the sector contracted in May, while government numbers released earlier pointed to a pickup in activity.
Meanwhile, manufacturing PMI for the euro zone climbed to 48.3 from 46.7 in April, marking the highest level in 15 months. But the reading still indicated contraction.
Gold likes quantitative easing, “so as long as there isn’t any big news out hinting towards a down-scaling in QE3, one ingredient for gold bulls is in the mixing bowl,” said Adam Koos, president of Libertas Wealth Management Group.
On Monday, the dollar DXY +0.02% also fell sharply after the ISM figures, providing support for gold and other commodities.
A weaker dollar tends to provide a lift for prices of dollar-denominated commodities by making them cheaper for holders of other currencies to buy.
Bigger news this week will be the U.S. employment report on Friday, and any further QE signals from the Fed, said Wright.