Gold Prices Push Higher Following Disappointing ISM Service-Sector Data
(Kitco News) - Gold prices continue to move higher as optimism in the U.S. service sector dropped in April, according to the latest report from the Institute for Supply Management (ISM).
Friday, the ISM nonmanufacturing Purchasing Managers Index fell to a reading of 55.2%, following March’s reading of 56.1. According to consensus forecasts, economists were expecting to see a rise to 57.2%
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 greater or smaller the rate of change. The pace of growth in the service sector fell to its lowest level since August 2018.
Gold prices were already on the uptrend ahead of the report and jumped solidly higher in initial reaction. June gold futures last traded at $1,281.80 an ounce, up 0.76% on the day.
Although the headline data was weaker than expected, the components of the report were more mixed. The Business Activity Index rose to 59.5% last month, up from March’s reading of 57.4%; meanwhile, the New Orders Index dropped to 58.1%, compared to March’s level of 59%.
Optimism in the service sector’s labor market dropped slightly last month, decreasing to a reading of 53.7%, compared to the previous level of 55.9%. However, the Employment Index has less importance in this report as it comes after the U.S. nonfarm payrolls showed that the economy created 263,000 jobs in April.
Inflation data remains muted with the Price index dropped to 55.7%, down from March’s reading of 58.7%.
“The non-manufacturing sector has experienced an uptick in business activity, but in general, there has been a leveling off. Respondents are still mostly optimistic about overall business conditions, but concerns remain about employment resources,” said Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee.