Gold Lower Despite Lower ISM non-manufacturing Index

The gold market is seeing little reprieve despite a bigger-than-expected decline in the U.S. service sector.

Wednesday. The ISM said that its non-manufacturing Purchasing Managers Index showed a reading of 55.2% in March, down from February’s reading of 57.6%. Consensus forecasts were calling for a slight drop, to a reading of 57.0%.

Readings above 50 are seen as a sign of economic growth; the farther an indicator is above or below 50, the greater or smaller the rate of change.

Ahead of the report, gold prices were hovering just above session lows. The market has been struggling following a stronger than expected private-sector employment report from payrolls processing company ADP. June Comex gold futures last traded at $1,244.80 an ounce, down 0.81% on the day.

Not only did the headline index show slower-than-expected growth in the service sector, but the reported showed broad-based weakness. Looking at the components of the report the business activity index dropped to 58.9%, down 4.7 percentage points from the previous reading at 63.6%; at the same time, the new orders index fell to 58.9%, compared to February’s reading of 61.2%.

The U.S. labor market also showed a decline with the employment index falling to 51.6%, down from 55.2% seen in February. Economists watch this component fairly closely as it could impact expectations for Friday’s nonfarm payrolls data. However, it appears that most economists are shaking off this drop and focusing on the ADP data that showed that 263,000 jobs were created in the U.S. last month.

via Kitco

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza