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Gold Prices See Little Reaction To Sharp Drop In ISM Service Sector Numbers

Kitco News

(Kitco News) - The gold market is seeing little reaction to disappointing economic data that shows momentum in the service sector fading, according to the latest report from the Institute for Supply management (ISM).

Tuesday, the ISM said its non-manufacturing index showed a reading of 56.8% for April, down from March’s reading of 58.8%. The data was weaker than expected as consensus forecasts were calling for a reading of 58.1%.

Readings above 50% in such diffusion indexes are seen as a sign of economic growth, and vice-versa. The farther an indicator is above or below 50%, the higher or smaller the rate of change.

Gold prices has ignored most economic data after it found some momentum following Wednesday’s Federal Reserve monetary policy decision. Although the U.S. central bank left rates unchanged, it hinted that it would be comfortable seeing inflation rise above the 2% target, which some have said is bullish for the yellow metal because this scenario will see real interest rates remain under pressure.

June gold futures last traded at $1,316.30 an ounce, up 0.0.82% on the day.

Not only did the headline data disappoint expectations but the components of the report showed broad-based weakness. The New Business Activities Index dropped to a reading of 59.1%, down from March’s reading of 60.6%.

The labor market also showed weakness with the Employment Index dropped to 53.6% last month, down from March’s reading of 56.6%.

According to the report, the sector is showing concerns about U.S. trade policy.

“The respondents have expressed concern regarding the uncertainty about tariffs and the effect on the cost of goods. Overall, the respondents remain positive about business conditions and the economy,” the report said.

Positive for the gold market, the data showed that price pressures are increasing. The report said that the Price Index increased to a reading of 61.8%, up from the previous level of 61.5%.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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