(Kitco News) - The gold market remains in a holding pattern; however, renewed activity in the U.S. service sector is creating some downside pressure on the precious metal.
The Institute for Supply Management (ISM) reported Thursday that its Services Purchasing Managers Index rose to 54.9% in September, compared to August’s reading of 51.5%. The data significantly exceeded expectations, as consensus forecasts predicted only a slight increase to 51.7%.
The gold market is struggling to hold its ground in response to the robust economic data. December gold futures last traded at $2,661 an ounce, down 0.32% on the day.
Activity in the service sector rose to its highest level since February 2023. The report noted broad-based increases across the index's components.
“The reading in September marked the seventh time the composite index has been in expansion territory this year,” Steve Miller, Chair of the ISM Services Business Survey Committee, said in the report.
The Business Activity Index rose sharply to 59.9%, up from August’s reading of 53.3%.
Similarly, the New Orders Index rose to 59.4%, up from 53.0% in the previous month.
However, the report also highlighted two issues in the service sector: rising inflationary pressures and a weakening labor market.
The report indicated that the Prices Index rose to 59.5%, up from August’s estimate of 57.3%.
Meanwhile, the Employment Index dropped to 48.1%, down from 50.2%. Economists have noted that this could place additional pressure on Friday’s nonfarm payroll data.
The report also pointed out that this was the first contraction in the Employment Index in three months.
Miller additionally noted that the upcoming U.S. presidential election is creating uncertainty within the service sector, affecting overall activity.
“The stronger growth indicated by the index data was generally supported by panelists’ comments; however, concerns over political uncertainty are more prevalent than last month,” he said. “The interest-rate cut was welcomed; however, labor costs and availability continue to be concerns across most industries.”
