(Kitco News) – Disappointing economic data continues to provide little support for the gold market as all the focus is on the Federal Reserve’s impending monetary policy decision.
This time, weaker than expected activity in the U.S. service sector is failing to provide any bullish traction for gold.
Wednesday, Institute for Supply Management (ISM) said that its service-sector index showed a reading of 57.1% for April, down from March’s reading of 58.3%. The data was weaker than expected, as consensus forecasts called for an increase to 58.5%.
Readings above 50% in such diffusion indexes are seen as a sign of economic growth and vice-versa. The farther an indicator is above or below 50%, the greater or smaller the rate of change.
The gold market, while holding support above $1,850 an ounce, continues to hover near session lows. June gold futures last traded at $1,862.70 an ounce, down 0.42% on the day.
Although the U.S. service sector continue to expand, albeit at a slower pace than expected, the report noted that rising inflation remains an ongoing threat.
“Business activity remains strong; however, high inflation, capacity constraints and logistical challenges are impediments, and the Russia-Ukraine war continues to affect material costs, most notably of fuel and chemicals,” said Anthony Nieves, chair of the ISM Services Business Survey Committee.
The report noted that inflation pressures rose to a record high last month with the Price Index hitting, 84.6%, up from the March figure of 83.8.
Looking at the other components of the report the Business Activity Index rose to 59.1% up from 55.5% in March. At the same time the New Orders Index dropped to 54.6%, down from the March reading of 60.1 percent.
The labor market also lost some momentum in April with the Employment Index falling to 49.5%, down from the previous reading of 54.0%.
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