Service sector

Gold price pulls away from daily lows as U.S. service sector falls short of expectations


(Kitco News) According to the latest data from the Institute of Supply Management (ISM), gold was holding at $1,860 an ounce as momentum in the services sector was slightly weaker than expected in May.

The non-manufacturing purchasing managers’ index was at 55.9% last month, down from 57.1% in April. The 1.2 percentage point decline left markets somewhat disappointed, with consensus forecasts for the index at 56.4%.

Readings above 50 are considered a sign of economic growth – the higher or lower an indicator is above or below 50, the higher or lower the rate of change.

May marked the lowest reading since February 2021, when the index was also at 55.9%, according to the report.

Looking in more detail, the new orders sub-index was at 57.6%, following April’s reading of 54.6%. The sub-index of business activity stood at 54.5% against 59.1% recorded the previous month. The employment index returned to expansion territory, rising to 50.2% from 49.5% in April. Economists are watching the latter figure closely as an indicator of the employment situation in the country.

“COVID-19 continues to disrupt the service sector, as well as the war in Ukraine. Labor is still a big issue and prices continue to rise,” the report notes.

Meanwhile, inflationary pressures have fallen from all-time highs recorded in April, with the price index falling to 82.1% in May from 84.6% the previous month.

Gold remained largely unchanged as it held the $1,860 per ounce level after the data release. August Comex gold futures last traded at $1,863.10, down 0.44% on the day. Gold was more sensitive to nonfarm payrolls data released earlier on Friday.

“The U.S. Unemployment Situation report just released in May showed that nonfarm payrolls in the U.S. increased by 390,000. The number is expected to show an increase of 328,000. of 428,000 was reported in April data. The unemployment rate in May was 3.6% and was expected to be 3.5% compared to 3.6% in April. The closely watched average hourly earnings figures showed an increase of 5.24% per year,” said Kitco senior analyst Jim Wyckoff.


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