Gold Remains Weak Despite Drop In ISM Non-Manufacturing Index
(Kitco News) - The gold market is seeing little reprieve despite a bigger-than-expected decline in the U.S. service sector.
Wednesday. The ISM said that its non-manufacturing Purchasing Managers Index showed a reading of 55.2% in March, down from February’s reading of 57.6%. Consensus forecasts were calling for a slight drop, to a reading of 57.0%.
Readings above 50 are seen as a sign of economic growth; the farther an indicator is above or below 50, the greater or smaller the rate of change.
Ahead of the report, gold prices were hovering just above session lows. The market has been struggling following a stronger than expected private-sector employment report from payrolls processing company ADP. June Comex gold futures last traded at $1,244.80 an ounce, down 0.81% on the day.
Not only did the headline index show slower-than-expected growth in the service sector, but the reported showed broad-based weakness. Looking at the components of the report the business activity index dropped to 58.9%, down 4.7 percentage points from the previous reading at 63.6%; at the same time, the new orders index fell to 58.9%, compared to February’s reading of 61.2%.
The U.S. labor market also showed a decline with the employment index falling to 51.6%, down from 55.2% seen in February. Economists watch this component fairly closely as it could impact expectations for Friday’s nonfarm payrolls data. However, it appears that most economists are shaking off this drop and focusing on the ADP data that showed that 263,000 jobs were created in the U.S. last month.
Royce Mendes, senior economist at CIBC World Markets, shrugged off the disappointing numbers, noting that the service-sector is still in expansion territory.
"All told, this was slightly weaker than expected, but is still indicative of a stronger pace of growth in Q1 than most what most tracking estimates of GDP are suggesting," he said.