(Kitco News) - The gold market fell to session lows after the latest data showed activity in both the U.S. service and manufacturing sectors improved this month.
S&P Global announced on Thursday that its preliminary Purchasing Managers Index for the service sector rose to 54.8 in May, up from April’s reading of 51.3. Activity in the service sector was stronger than expected, as economists forecasted an unchanged reading.
Activity in the manufacturing sector also improved, rising to 50.9 from April’s reading of 50.
The gold market sold off in the minutes following the 9:45 am EDT release, with spot gold hitting a session low of $2,350.63 per ounce. It last traded at $2,360.39 an ounce, down 0.75% on the day.
The headline Composite Output Index rose from 51.3 in April to 54.4 in May, its highest level since April 2022, according to the report. “The 3.1 index point rise (the largest gain for 15 months) signals a marked acceleration of growth midway through the second quarter,” the report said. “Output has now risen continually for 16 consecutive months, with May’s acceleration contrasting with the slowdown seen in March and April.”
“The US economic upturn has accelerated again after two months of slower growth, with the early PMI data signalling the fastest expansion for just over two years in May,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. “The data put the US economy back on course for another solid GDP gain in the second quarter.”
Williamson did note that companies remain cautious about the economic outlook due to uncertainty over inflation and interest rates. “Selling price inflation has meanwhile ticked higher and continues to signal modestly above-target inflation,” he said. “What’s interesting is that the main inflationary impetus is now coming from manufacturing rather than services, meaning rates of inflation for costs and selling prices are now somewhat elevated by pre-pandemic standards in both sectors to suggest that the final mile down to the Fed’s 2% target still seems elusive.”
