Gold price off daily lows as U.S. service sector comes in short of expectations

(Kitco News) Gold was holding the $1,860 an ounce as momentum in the service sector was slightly weaker than expected in May, according to the latest data from the Institute of Supply Management (ISM).

The Non-Manufacturing Purchasing Managers Index was at a reading of 55.9% last month, down from April’s 57.1%. The 1.2 percentage-point drop was somewhat a disappointment to the markets, with the consensus forecasts calling for the index to come in at 56.4%.

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.

May marked the lowest reading since February 2021, when the index was also at 55.9%, the report said.

Looking into more detail, the new orders sub-index was at 57.6%, following April’s reading of 54.6%. The business activity sub-index was at 54.5% compared to 59.1% registered in the previous month. The employment index returned to the expansionary territory, rising to 50.2% after April’s 49.5% reading. Economists keep a close eye on the latter number as a gauge of the employment situation in the country.

“COVID-19 continues to disrupt the services sector, as well as the war in Ukraine. Labor is still a big issue, and prices continue to increase,” the report noted.

Meanwhile, inflation pressures dropped from all-time highs posted in April, with the price index declining to 82.1% in May from the previous month’s 84.6%.

Gold was largely unchanged as it held the $1,860 an ounce level following the data release. August Comex gold futures were last trading at $1,863.10, down 0.44% on the day. Gold was more sensitive to the non-farm payrolls data published earlier on Friday.

“The just-released U.S. unemployment situation report for May showed U.S. non-farm payrolls up 390,000. The number was expected to show a rise of 328,000. A rise of 428,000 was reported in the April data. The unemployment rate in May came in at 3.6% and was expected to be 3.5% versus 3.6% reported in April. The closely watched average hourly earnings figures showed a rise of 5.24% annually,” said Kitco’s senior analyst Jim Wyckoff.