Gold prices pare losses as U.S. flash PMI shows weakness in manufacturing, service sectors

(Kitco News) - 
The gold market remains under pressure but is well off its session lows as activity in both the U.S. service and manufacturing sectors loses momentum.

Tuesday, S&P Global said its preliminary Purchasing Managers Index for the service sector dropped to 50.9, down from March’s reading of 51.7.  Activity in the service sector was weaker than expected, as economists forecasted a rise to 52.

The report said that activity in the service sector dropped to a five-month low.

At the same time, activity in the manufacturing sector dropped back into contraction territory, falling to 49.9, down from March’s downwardly revised reading of 51.9.

The report said that the index fell to a four-month low.

Although the gold market remains in negative territory, it has seen its losses slightly pared in initial reaction to the disappointing economic data. June gold futures last traded at $2,342.60 an ounce, down 0.17% on the day.

“US business activity continued to increase in April, but the rate of expansion slowed amid signs of weaker demand. The latest rise in output was the smallest in the year-to-date reflecting reduced rates of growth and falling orders in both the manufacturing and services sectors,” the report said.

The report also noted that as activity slows, inflation remains stubbornly elevated.

“In line with the picture for input costs, output prices increased at a solid but slower rate during April, the pace of inflation cooling again having accelerated to a ten-month high in March. Prices charged inflation was in line with the series long-run average, though still elevated by pre-pandemic standards,” the report said.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said in the report that the data not only points to slower growth for the second quarter but growth could continue to slow as business expectations dropped to a five-month low.