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Gold prices hit new daily lows as U.S. service sector beats expectations in October

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Gold prices hit new daily lows as U.S. service sector beats expectations in October

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(Kitco News) Gold prices saw more losses after momentum in the service sector accelerated in October, according to the latest data from the Institute of Supply Management (ISM).

The Non-Manufacturing Purchasing Managers Index rose to a reading of 54.7% in October, up from September’s 52.6%. The 2.1 percentage-point advance surprised the markets, with consensus expectations calling for the index to come in at 53.5%.

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.

“This represents continued growth in the non-manufacturing sector, at a faster rate,” the report said. “The non-manufacturing sector had an uptick in growth after reflecting a pullback in September. The respondents continue to be concerned about tariffs, labor resources and the geopolitical climate.”

The details of the ISM Non-Manufacturing report revealed that the new orders sub-index rose to 60.3% from July’s 54.1%.

Looking at other components, business activity sub-index increased to 55.6% from 53.7% registered in September. The employment index rose to 53.7% from September’s reading of 50.4%. Economists keep a close eye on the latter number as a gauge into the employment situation in the country.

Inflation pressures rose for the 29th consecutive month, with the price index coming in at 56.6% in October.

In an immediate reaction to the latest ISM Non-Manufacturing index, gold prices dropped to new daily lows with December Comex gold futures last trading at $1,491.00, down 1.33% on the day.

Prior to the release, gold prices were already down more than 1% on the day on renewed risk-on sentiment triggered by positive U.S.-China trade headlines and the rallying U.S. stock market.

The service sector’s advance in October is consistent with “modest growth,” said CIBC Capital Markets senior economist Andrew Grantham.

“The details showed most of the major sub-indices improving, including business activity, new orders and employment. As such, the report appears to confirm what Friday's payrolls figures suggested, namely that the services side of the U.S. economy is still in good shape, which will negate the need for further interest rate reductions,” Grantham wrote.

Live 24 hours gold chart [Kitco Inc.]

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