Gold Prices Steady As U.S. Service Sector's Growth Cools In January
(Kitco News) - Gold prices held around the $1,318 an ounce level after momentum in the service sector slowed in January, according to the latest data from the Institute of Supply Management (ISM).
The Non-Manufacturing Purchasing Managers Index declined to a reading of 56.7% in January, down from December’s 58%. The 1.3 percentage-point drop was somewhat surprising for the markets, with consensus expectations calling for the index to come in at 57.2%.
“The non-manufacturing sector’s growth rate cooled off in January. Respondents are concerned about the impacts of the government shutdown but remain mostly optimistic about overall business conditions,” the report said.
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.
In an immediate reaction to the latest ISM Non-Manufacturing index, gold prices remained largely unchanged after seeing a small boost from daily lows earlier this morning. April Comex gold futures were last at $1,318.40, down 0.07% on the day.
“The yellow metal has been lifted off its daily lows as the U.S. dollar index has backed down from its session high. The gold bulls remain in firm near-term technical control, as evidenced by traders willing to step in and buy the dip in prices,” said Kitco’s senior technical analyst Jim Wyckoff.
The details of the ISM Non-Manufacturing report revealed that the new orders sub-index dropped to 57.7% from December’s 62.7%, and the business activity sub-index declined to 59.7% from 61.2%.
The employment index, on the other hand, rose to 57.8% from December’s reading of 56.6%. Economists keep a close eye on this number as a gauge into the employment situation in the country.
Inflation pressures also rose for the 20th consecutive month, with the price index coming in at 59.4% in January.
Analysts were not discouraged by the slightly lower growth pace, stating that the service side of the U.S. economy was still healthy.
“The index is still entrenched in expansionary territory and is in line with the average level seen since mid-2017. Still, the last couple of headline readings are cooler than the lofty prints seen earlier in the second half of 2018, an indication that the U.S. economy is on a slightly slower growth trajectory this year,” said CIBC World Markets senior economist Katherine Judge.