Key Takeaways:
A key measure of the U.S. services sector showed a slight cooling in April, adding to signs of a moderating economy and sending investors toward the traditional safety of gold.
"The April data shows a slight pullback in the rate of growth, but the overall sector remains in expansion," said Anthony Nieves, Chair of the Institute for Supply Management (ISM) Business Survey Committee. "Geopolitical concerns, particularly around oil prices, continue to be a factor in business sentiment."
The ISM Services Purchasing Managers' Index registered 53.6, down from 54.0 in March and just below the consensus forecast of 53.7. While the reading indicates the 16th straight month of expansion for the crucial sector, key sub-components pointed to a potential loss of momentum. The New Orders Index fell sharply to 53.5 from 60.6, and the Employment Index, while improving to 48.0 from 45.2, remained in contraction territory. In response to the data, spot gold rose 1 percent to $4,566.79 an ounce.
The report complicates the outlook for the Federal Reserve. Softer economic data could argue for a less aggressive policy stance, which is typically bullish for non-yielding gold. However, the Prices Paid component of the survey held steady at a high 70.7, showing that inflationary pressures within the services sector are not yet abating, a factor that will keep policymakers cautious ahead of their next meeting.
A separate report from S&P Global confirmed the expansion, though at a slower pace. The S&P Global Services PMI final reading for April was 51.0, revised down from a preliminary 51.3.
This article is for informational purposes only and does not constitute investment advice.
