(Kitco News) - The gold market could continue to see further selling pressure, moving further away from critical resistance at $2,050 an ounce as the U.S. service sector sees solid activity in January, according to the latest report from the Institute for Supply Management (ISM). Monday, the ISM said its Service Sector PMI rose to 53.4 last month, up from December’s reading of 50.6. The data also beat consensus estimates that looked for an increase to 52.0.\ “The majority of respondents indicate that business is steady. They are optimistic about the economy due to the potential impact of interest rate cuts; however, they are cautious due to inflation, associated cost pressures, and ongoing geopolitical conflicts,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee 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. Although gold is seeing some solid selling pressure at the start of the week, it has yet to see much reaction to the latest economic data. April gold futures last traded at $2,036.20 an ounce, down 0.85% on the day. The report also noted rising inflation pressures, which could weigh on gold prices in the near term. Looking at the components of the report, the Business Activities Index was 55.8, unchanged from December’s reading. Meanwhile, the New Orders Index rose to 55.0 from the previous reading of 52.8. The report also noted solid growth in the labor market as the Employment Index rose to 50.5, up from December’s reading of 52.8. The ISM data aligns with last week’s nonfarm payrolls report, which shows significant growth in the labor market as the U.S. economy created 353,000 jobs last month. Looking at inflation pressures, the report said that the Prices Index rose to 64.0, up from December’s reading of 56.7. The gold market will be sensitive to rising inflation pressures as the Federal Reserve has been clear that it wants to see clear evidence that consumer prices are falling back to its 2% target.
Neils Christensen
Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press. Neils can be contacted at: 1 866 925 4826 ext. 1526 nchristensen at kitco.com @KitcoNewsNOW
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