The latest data from the Institute for Supply Management (ISM) said that the US service sector continued to expand last month, while price pressure increased sharply.
The ISM said Wednesday morning that the purchasing managers' index (PMI) for the service sector rose to 53.5 in February, up from 52.8 in January. This figure is better than economists predict, who predict PMI will reach 53.
February is the third consecutive month that all four components of the service PMI - business operations, new orders, jobs and delivery from suppliers are all in the growth zone. This is the first time this has happened since May 2022.
The slow growth rate of the business performance index has been compensated by the improvement of the remaining three indexes - Steve Miller, Chairman of the Business and Service survey Committee of ISM said.
An index above 50 shows economic growth, below 50 shows decline. The further the distance is from the 50 mark, the faster the rate of increase or decrease.
Gold prices soared to a session high of $2,922.67 an ounce shortly after the data was released at 10:00 (EDT).
The reports composition indicators showed a marked improvement. The new order index rose to 52.1, from 51.3 in January. Meanwhile, the business performance index decreased slightly to 54.4 compared to 54.5 in the previous month, and the supplier delivery index increased to 53.4 from 53 in the previous month.
However, inflationary pressures in the service sector continued to increase, with the price index reaching 62.6 in February, higher than the 60.4 level in January. This is the first time since March 2023 that the index has recorded three consecutive months above 60%, Miller said.
The price index increased to 62.6, showing that inflation in the service sector continued to heat up, reinforcing the view that the US Federal Reserve (FED) could keep monetary policy tight for longer. This is another factor supporting gold in the long term, as investors seek a safe haven against prolonged inflation risks. In the short term, gold prices are still under pressure to adjust, but the long-term outlook is still positive if economic instability increases.
The labor market in the service sector also improved when the employment index increased to 53.9, from 52.3 in the previous month.
However, concerns remain about the potential impact of tariffs, Miller warned. Some businesses say cuts to federal spending are negatively affecting their business forecasts.
Gold futures for April continued to maintain short-term advantage as buyers continued to control the market. The next target for buyers is to conquer and maintain the closing price above the important resistance level of 2,974 USD/ounce.
Meanwhile, the sellers are trying to push prices below the important support level of 2,844.1 USD/ounce. The upcoming resistance levels were determined at 2,933.7 USD/ounce, then at 2,939.8 USD/ounce. In contrast, the nearest support zone is at $2,900/ounce, followed by $2,892.5/ounce.
The price trend in the coming time will depend on the ability of buyers to maintain the increase as well as the pressure of adjustment from selling pressure in the market.
