# NEWS

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NEWS

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## 11. Manufacturing

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### 11.2. 1

11.2.1. PMI Index The PMI Index is an important indicator of economic health. It is compiled and released monthly by the Institute for Supply Management. The ISM sends surveys to senior executives at more than 400 companies, asking managers about monthly changes in business conditions in five major areas: new orders, inventory levels, production, supplier deliveries, and employment. Contrary to Markit Economics PMI’s, the ISM weighs each of these survey areas equally. The PMI is calculated as: PMI = (P1 x 1) + (P2 x 0.5) + (P3 x 0) Where: P1 = percentage of answers reporting an improvement P2 = percentage of answers reporting no change P3 = percentage of answers reporting a deterioration As one can see, the PMI is a number from 0 to 100. If all managers report improvement, the index is 100. If all respondents note a deterioration, the index equals 0. If all managers see no change, the index is 50. Hence, the index above 50 means an expansion, while below 50 implies a contraction.

### 11.3. gold pmi

11.3.1. PMI Index and Gold What is the link between the PMI Index and the gold prices? In theory, the high PMI (above 50) indicates that the US economy is expanding, which should be bad for the gold prices. And low PMI (below 50) signals the economic contraction, which should support the yellow metal. But let’s put theory aside and look at data.