Gold price trims losses as U.S. manufacturing PMI cools in May but services activity still robust
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(Kitco News) Gold edged up after the preliminary manufacturing and service-sector sentiment data were released for May.
The flash U.S. manufacturing Purchasing Managers (PMI) Index for May signaled renewed deterioration, falling to 48.5, according to the S&P Global Flash US Composite PMI report. The May number disappointed market expectations of a reading of 50.
In contrast, the service sector expanded in May, with the PMI reading rising to 55.1. Market consensus calls were expecting an advance to 52.6. “The rate of growth in activity was the fastest for just over a year, with firms linking the upturn to greater demand from new and existing clients,” the report said.
Any monthly reading above 50 points to an expanding sector, while anything below that shows a contraction in activity.
The U.S. economy continued to expand in May, led by the service sector, said S&P Global Market Intelligence chief business economist Chris Williamson, pointing to the divergence between manufacturing and services.
“While service sector companies are enjoying a surge in post-pandemic demand, especially for travel and leisure, manufacturers are struggling with over-filled warehouses and a dearth of new orders as spending is diverted from goods to services,” Williamson said.
Also, the service sector is hiking prices, which puts upward pressure on problematic inflation.
“It is now the service sector’s turn to be hiking prices amid resurgent demand and an inability to cope with order inflows due to a lack of capacity,” Williamson said. “Jobs growth has accelerated as service providers companies seek to meet demand, but this tightening labor market amid strong demand will be a concern as a fuel of further inflationary pressures.”
Following the PMI release, gold edged up and held steady, with June Comex gold futures last trading at $1,972.50, down 0.24% on the day.