PMI ISM US Manufacturing Contract to 47.9 – Silent Recession Gains Strength

[Igor Pereira]

Traders, the US "strong economy" narrative has just suffered a severe blow. The data from the December Manufacturing ISM have just been released and confirm that the American industry is shrinking, not growing.

By Igor Pereira Financial Market Analyst

Index dropped to 47.9, erring the estimate of 48.3 and coming below the previous reading of 48.2. This is the lowest level since October 2024.

Below, what this means for the Fed, the Dollar and, of course, the Gold.

The magic number for the PMI is 50. Over 50 means expansion; below means contraction.

• The Result: With 47.9, U.S. manufacturing is firmly in contracting territory.

• Trend: The fact that it is the lowest level since October 2024 (over a year ago) shows that despite all the fiscal stimulus and talk about "Soft Landing", the real economy of tangible goods is bleeding.

• The Frustrated Expectation: The market expected a recovery to 48.3. Failure signals structural weakness in demand.

This data places the Federal Reserve in a terrible position.

• Inflation (Energy): As we have seen in the previous report, energy inflation has risen by 4.2%.

• Growth (MIP): Now we see manufacturing contracting to 47.9.

• The Result: This is the manual of Stagflation (high inflation + low growth). The Fed can't raise interest to fight inflation without killing the industry for good, but it can't cut interest aggressively without making energy inflation explode.

For us metal traders and exchange, the reading is clear:

• Dollar (DXY): Weak economic data usually weigh on the Dollar, as the market begins to emphasize that the Fed will have to "pivotar" (cut interest) to save the economy, regardless of inflation.

• Gold (XAU/USD) and Silver: This is the Goldilocks for metals scenario. Fear of recession drives demand for refuge, and the prospect of lower interest (to save manufacturing) reduces the cost of opportunity to hold gold. This supports our thesis on Premium Insights.

The US economy is slowing down faster than the consensus admitted. My recommendation: Use any weakness in Gold caused by short-term volatility to buy. The macro foundation (coming recession) is aligning with the technician (pivot breakup).

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