(Kitco News) - Gold prices remain contained near $4,500 an ounce but could attract some bullish attention as momentum in the U.S. manufacturing and services sectors remains subdued.
S&P Global reported on Tuesday that its flash Purchasing Managers Index (PMI) Composite Output Index held steady at 51.7 in May, unchanged from April.
The Services Sector PMI fell slightly to 50.9, down from April’s reading of 51. According to consensus estimates, economists were looking for a reading of 51.1.
At the same time, the Manufacturing PMI rose to 55.3, up from the previous reading of 54.5. The data beat consensus forecasts, as economists had estimated a slight drop to 53.8.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said that although the economy continues to expand, momentum is slowing.
“The damaging economic impact from the war in the Middle East is becoming increasingly evident in the business surveys. The ‘flash’ PMI data for May recorded only modest growth in business activity, as demand was again squeezed by a further spike in prices, and jobs were cut as firms worried over rising costs and the economic outlook,” he said. “Coming on the heels of a subdued April reading, the May PMI indicates that the economy will struggle to manage annualized GDP growth of much more than 1% in the second quarter. However, even this subdued pace of growth may not last.”
The gold market is not seeing any major reaction to the latest economic data. Spot gold last traded at $4,505.30 an ounce, down nearly 1% on the day.
Williamson also noted that higher prices are taking their toll on economic activity and consumption.
The report said that average prices charged for goods and services rose in April at the fastest rate since August 2022 amid growing supply scarcities and rising costs.
“Demand also looks set to cool further in response to rising prices. Firms’ costs have jumped higher at a pace not seen since the energy price shock of 2022 and are being passed on to customers in the form of sharply higher selling prices. The survey price gauges therefore, indicate that inflation looks set to rise further just as the economy cools,” he said.
According to economists, the S&P Global flash data continues to put the Federal Reserve in a difficult position, faced with slowing economic growth and rising inflation pressures.
Despite growing pressure on the economy, markets are currently focused on inflation, which has pushed long-term bond yields to critical levels that could force the Federal Reserve to raise interest rates.
Markets are pricing in more than a 50% chance of a rate hike by the end of the year.
