Gold rallies back to highest in over 6 years as ISM manufacturing marks lowest reading since 2016

Gold futures rallied back to their highest level in more than six years on Tuesday, as a decline in August U.S. manufacturing contributed to worries about the domestic economy.

Trade-related tensions, global growth concerns and the threat of the market being roiled by a disorderly exit by Britain from the European Union also drew investors to the haven metal.

 The Institute for Supply Management’s manufacturing index fell to 49.1% in August from 51.2% in July. Any reading below 50% indicates worsening conditions. This is the first contraction in 35 months

 “This should give further justification towards [a Federal Open Market Committee] rate cut, anticipated in September,” said Jeff Wright, executive vice president of GoldMining Inc.

 “Traders are pointing to [the] ISM being weak as another reason to increase gold exposure,” he said. However, overall, economic data was mixed, with U.S. construction spending edging up by a seasonally adjusted 0.1% in July, and the August PMI manufacturing number was positive, he said. “So the economic data was a bit mixed.”

 Gold for December delivery GCZ19, +1.62%  added $26.50, or 1.7%, to settle at $1,555.90 an ounce on Comex—the highest finish since April 2013, according to FactSet data. That was the first gain for the most-active contract in four sessions. It finished last week down 0.5%, but 6.3% higher in August.

December silver SIZ19, +4.90%  jumped 89.5 cents, or 4.9%, higher to end at $19.237 an ounce. That was the highest most-active contract settlement since September 2016. Silver stole gold’s thunder in August, logging a nearly 11% rise.

“I am looking for silver to still play catch up to gold, but [it would also] see a sharper decline on any pullbacks over next month or so,” said Wright.