Gold Prices Holding Gains Despite Surge In Sentiment In U.S. Service Sector
(Kitco News) - Gold prices continue to hold modest gains despite surging momentum in the U.S. service sector, according to the latest data from the Institute of Supply Management (ISM).
Thursday, the ISM said its Non-manufacturing Purchasing Managers Index showed a reading of 59.1% in June up from May’s reading of 58.6%. The increase was well above expectations as consensus forecasts were calling for a stable reading around 58.3%.
"Respondents continue to be optimistic about business conditions and the overall economy," the report said.
Gold prices have been in positive territory for most of the morning session, pushing higher as the U.S. dollar has lost some traction. The latest economic data has had little impact on the yellow metal. August gold futures last traded at $1,256 an ounce, up 0.20% on the day.
Katherine Judge, senior economist at CIBC World Markets said noted that sentiment in the service sector is near post-recession highs and bodes well for continued momentum for the U.S. economy.
“The better than expected print suggests that the US economy ended Q2 on solid footing and supports our above-4% growth estimate for the quarter,” she said.
The components of the report showed broad-based improvement from the previous month. The business activity index increased to a reading of 63.9% in June, up from May’s reading of 61.3%; at the same time the new orders index increased to 63.2%, up from the previous level of 60.5%.
However, the closely watched employment index dropped to a reading of 53.6%, down slightly from May’s reading of 54.1%. Economists watch the employment index closely as it is used to estimate the government official employment data, which will be released Friday.
The drop in the index raises the downside risk to tomorrow’s nonfarm payrolls data.
Mixed for gold is the sector’s inflation expectations. The price index dropped to reading of 60.7% last month, down from May’s level of 64.3%.