(Kitco News) – The gold market continues to see considerable bullish momentum as disappointing U.S. economic data continues to drive safe-haven demand for the precious metal.
Tuesday, the Institute for Supply Management (ISM) said its Services Purchasing Managers Index dropped to 52.6% for February, compared to January’s reading of 53.4. The data was weaker than expected as consensus forecasts looked for a more moderate drop to 53.0.
“The slight decrease in the rate of growth in February is a result of faster supplier deliveries and the contraction in the Employment Index. The majority of respondents are mostly positive about business conditions. Respondents remain concerned about inflation, employment, and ongoing geopolitical conflicts,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee, in the report.
The economic data continues to provide solid support for the precious metal as prices remain within striking distance of $2,138.60 an ounce, up 0.61% on the day.
The components of the report were relatively mixed as the labor market lost momentum and inflation pressures weakened. The report said the Business Activities Index rose to 57.2%, up from January’s reading of 55.8%. At the same time, the New Orders Index rose to 56.1%, up from 55.0%.
However, the labor market fell into contraction territory, with the Employment Index falling to 48%, down from January’s reading of 50.5%. Economists pay close attention to this index as the service sector is the largest component of the U.S. labor market and could impact expectations ahead of Friday’s nonfarm payrolls report.
In a short-term positive trend, the report noted weaker inflation pressures. The Prices Paid Index dropped to 58.6%, down from 64.0%. According to some analysts, weaker inflation pressures give the Federal Reserve to ease its monetary policy this year.
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