Gold attractive as manufacturing outlook far from rosy say experts

The global manufacturing sector has had a challenging few months overall, with slowing growth and falls in output. The US Manufacturing Index, released yesterday gave some unexpected good news to the sector however, with a better than expected performance.

According to the data, the HS Markit manufacturing Purchasing Managers’ Index crept up in October, reaching 51.5 which is a slight lift on last month’s 51.1. While this suggests that stormy seas could be starting to settle, Bloomberg’s Managing Editor, Alexandre Tanzi says other clouds are gathering, noting “even with the improvement, manufacturing is likely to continue to weigh on the economy, amid a dimmer global growth outlook and trade tensions with China. Commerce Department figures earlier Thursday showed that orders placed with U.S. factories for business equipment declined for a second straight month and shipments matched the biggest drop since 2016.”

The malaise also appears to be both spreading and settling in elsewhere, with Japan turning in its worst figures in three years. In Europe, there is no change noted, meaning manufacturing continues to stagnate at low levels not seen in more than seven years.

So why is this good news? It’s great if you want to buy now (and you should based on price predictions) for two reasons. Firstly, the stock market largely held fairly steady on the news, perhaps boosted by better than expected jobless claims figures, meaning gold prices haven’t taken the leap they normally would when faced with such data. This creates an opportunity to buy now before prices rise.

The second reason? Chris Williamson, Chief Business Economist at IHS Markit says despite the slightly better than expected performance, the long term prospects for manufacturing are far from rosy noting, “Despite business activity lifting from recent lows, the survey data point to annualized GDP growth of just under 1.5% at the start of the fourth quarter, and a near-stalling of new order growth to the lowest for a decade suggests that risks are tilted toward growth remaining below trend in coming months.”

This means that gold continues to be a very attractive prospect – buy now to capitalise.