The gold market is showing little reaction as activity in the U.S. service sector moved back into expansionary territory last month.
The Institute for Supply Management (ISM) announced on Monday that its Services Purchasing Managers Index rose to 51.4% in July, compared to June’s reading of 48.8%. The data was slightly better than expected, as consensus forecasts called for an improvement to 51%.
“Economic activity in the services sector expanded in July, a trend that has been interrupted only three times — though twice in the last four months — since early in the coronavirus pandemic,” the report said, noting that the services sector expanded for the 47th time in 50 months.
The gold market is holding steady at its lower range following the better-than-expected services data, with spot gold last trading at $2,387.15 for a loss of 2.27% on the session.
“The reading in July marked the fifth time the composite index has been in expansion territory in 2024,” said Steve Miller, Chair of the ISM Services Business Survey Committee. “Before April, the services sector grew for 15 straight months following a Services PMI reading of 49 percent in December 2022; the last contraction before that was in May 2020 (45.4 percent).”
Readings above 50% in such diffusion indexes signify economic growth and vice-versa. The farther an indicator is above or below 50%, the greater or smaller the rate of change.
The positive reading comes after last week’s ISM Manufacturing PMI showed that sector falling deeper into contractionary territory. Economists have said that the data indicates a greater risk of economic slowdown.
Looking at the components of the report, the Business Activity Index was 54.5% in July, 4.9 percentage points higher than the 49.6% posted in June, and a return to expansion after one month of contraction. The New Orders Index rose to 52.4% last month, which is 5.1% higher than June’s figure of 47.3 percent but still the fourth-lowest reading since early in the pandemic.
“The Employment Index expanded for just the second time in 2024; the reading of 51.1 percent is a 5-percentage point increase compared to the 46.1 percent recorded in June,” Miller wrote.
The report also noted a rise in price pressures. “The Prices Index registered 57 percent in July, a 0.7-percentage point increase from June’s reading of 56.3 percent,” he said.
Source: Ernest Hoffman Kitco
