(Kitco News) - Gold prices are attempting to attract new bullish momentum to retest resistance at $3,400 an ounce, but they are receiving limited support from a slight improvement in U.S. economic activity across both the services and manufacturing sectors.
S&P Global reported on Tuesday that its flash Purchasing Managers Index (PMI) Composite Output Index fell slightly to 52.8, down from May’s reading of 53.0.
“While the June rise in output was the third strongest so far this year, the pace of growth remains well below that recorded in late 2024. Output has nevertheless now grown continually for 29 months,” the report said.
Breaking it down by sector, the report noted that the Manufacturing PMI remained unchanged from May’s reading of 52.0. The data was slightly better than expected, as economists had forecast a drop to 51.1.
Meanwhile, the PMI for the services sector rose in June to 47.7, up from May’s reading of 46.4. This increase was roughly in line with economists' expectations.
The gold market continues to edge higher, showing a muted reaction to the latest economic data. Spot gold last traded at $3,386.09 an ounce, up 0.57% on the day.
Although economic activity has improved, the report noted that it remains well below levels seen last year. At the same time, prices have risen sharply in both the manufacturing and services sectors as President Donald Trump’s tariffs begin to take effect.
“The June flash PMI data indicated that the U.S. economy continued to grow at the end of the second quarter, but the outlook remains uncertain while inflationary pressures have risen sharply in the past two months,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. “Although business activity and new orders continued to grow in June, growth has weakened amid falling exports of both goods and services.
“Prices for goods have meanwhile surged again, with the rate of increase accelerating to a three-year high as firms pass higher tariff-related costs on to customers. Service providers are by no means immune to this tariff impact and likewise reported another jump in prices, often linked to tariffs on inputs such as food,” Williamson added.
Williamson noted that slower growth and higher inflation are likely to compel the Federal Reserve to maintain its neutral monetary policy stance.
