Gold Prices See Little Reaction To Sharp Drop In ISM Service Sector Numbers
(Kitco News)- Thegold market is seeing little reaction to disappointing economic data that showsmomentum in the service sector fading, according to the latest report from theInstitute for Supply management (ISM).
Tuesday,the ISM said its non-manufacturing index showed a reading of 56.8% for April,down from March's reading of 58.8%. The data was weaker than expected asconsensus forecasts were calling for a reading of 58.1%.
Readingsabove 50% in such diffusion indexes are seen as a sign of economic growth, andvice-versa. The farther an indicator is above or below 50%, the higher orsmaller the rate of change.
Goldprices has ignored most economic data after it found some momentumfollowing Wednesday's Federal Reserve monetary policy decision. Although theU.S. central bank left rates unchanged, it hinted that it would be comfortableseeing inflation rise above the 2% target, which some have said is bullish forthe yellow metal because this scenario will see real interest rates remainunder pressure.
June gold futureslast traded at $1,316.30 an ounce, up 0.0.82% on the day.
Not only did the headline data disappoint expectations butthe components of the report showed broad-based weakness. The New BusinessActivities Index dropped to a reading of 59.1%, down from March’s reading of60.6%.
The labor market also showed weakness with the EmploymentIndex dropped to 53.6% last month, down from March’s reading of 56.6%.
According to the report, the sector is showing concernsabout U.S. trade policy.
“Therespondents have expressed concern regarding the uncertainty about tariffs andthe effect on the cost of goods. Overall, the respondents remain positive aboutbusiness conditions and the economy,” the report said.
Positivefor the gold market, the data showed that price pressures are increasing. Thereport said that the Price Index increased to a reading of 61.8%, up from theprevious level of 61.5%.
By Neils ChristensenFor Kitco News
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