Gold Prices Off Highs But Holding Gains Following Drop In ISM Service Sector Data
(Kitco News)- Although gold is off its sessionhighs, the market continues to hold on to modest gains following a drop insentiment within the service sector, according to the latest data from the Institutefor Supply Management.
Wednesday, the ISM said its non-manufacturing index showed a readingof 58.8% for March, down from February's reading of 59.5%.Consensus forecasts were calling for a reading around 59.0%.
Whilethe report showed a drop in sentiment, overall the data shows positive growthexpectations for the service sector. Readings above 50% in such diffusionindexes are seen as a sign of economic growth, and vice-versa. The farther anindicator is above or below 50%, the higher or smaller the rate of change.
Goldprices were up ahead of the report. June gold futures last traded at $1,346.30an ounce, up 0.67% on the day. According to analysts, traders are moreconcerned with the growing threat of a trade war between China and the U.S.thank economic data.
The Components of the report showmixed strength within the service sector. The report said that the Non-Manufacturing BusinessActivity Index dropped to 60.6%, down from the February reading of 62.8%. Atthe same time, the New Orders Index dropped to 59.5%, 5.3 down from 64.8% in February.
“The cooling off of the New Orders Index possibly prevented aneven stronger reading for the NMI composite index,” the report said. “The majority of respondentsremain positive about business conditions.”
However, the labor market showed some strength. The EmploymentIndex increased to a reading of 56.6% last month, up from the February readingof 55%. Economists noted that the increase in the employment data bodes well for Friday's nonfarm payrolls report.
Positive for gold prices, inflation is also increasing. The PricesIndex increased to a reading of 61.5%, up from February’s reading of 61%.
Andrew Grantham, senior economist at CIBC World Markets, said thatdespite the disappointing data, the sector still continues to grow.
“The overall index reading, whilesignaling a slowing, is still running at levels consistent with solid GDPgrowth,” he said.
By Neils ChristensenFor Kitco News
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