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Gold price edges up as U.S. service sector beats expectations in December

Kitco News

(Kitco News) Gold ticked up slightly as momentum in the service sector was stronger-than-expected in December, according to the latest data from the Institute of Supply Management (ISM).

The Non-Manufacturing Purchasing Managers Index was at a reading of 57.2% last month, up from November’s 55.9%. The 1.3 percentage-point increase surprised the markets, with consensus expectations calling for the index to come in at 54.6%.

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 reading represents a seventh straight month of growth for the services sector, which has expanded for all but two of the last 131 months,” the report said.

The details of the ISM Non-Manufacturing report revealed that the new orders sub-index was at 58.5% following November’s 57.2%. 

Looking at other components, the business activity sub-index was at 59.4% following 58.0% registered in November. The employment index was at 48.2% versus November’s 51.5%. Economists keep a close eye on the latter number as a gauge into the employment situation in the country.

Inflation pressures rose, with the price index coming in at 64.8% in December after September’s reading of 66.1%.

In an immediate reaction to the latest ISM Non-Manufacturing index, gold prices edged up with February Comex gold futures last trading at $1,917.10, up 0.45% on the day.

The rise in the services PMI was a surprise, said CIBC Capital Markets economist Katherine Judge.

“The advance reflected a rise in business activity despite stricter social distancing measures during the holidays in many states. With the virus continuing to spread rapidly, it's likely that the ISM' s index could fall in the months ahead, until widespread vaccination is a reality,” Judge wrote in a note to clients on Thursday.

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