(Kitco News) – Gold prices remain under significant selling pressure but continues to see little reaction to economic data, this time better than expected preliminary sentiment data from the U.S. manufacturing and service sector data.
Thursday, IHS Markit said its flash U.S. manufacturing Purchasing Managers Index for May rose to a reading of 39.8, up from April’s reading of 36.1. The data were better than expected. Economists were expecting to see a reading of 39.1.
At the same time, the firm’s service sector PMI reading rose to 36.9, up from February’s April’s level of 26.7. Economists were forecasting the index to come in at 32.6.
According to some economists, sentiment in the U.S. economy is improving as states start to ease lockdown measures. The U.S. economy ground to a half in the last two months as governments closed all non-essential business in an attempt to slow the spread of the COVID-19 pandemic.
The better than expected sentiment data comes after April’s reading, which was the lowest in the report’s history.
“Although the overall contraction in new business eased in May, it was still the second-steepest in the series history. Firms continued to report significant decreases in client demand as customers further postponed the placement of orders,” the report said.
Gold is seeing little reaction to the latest economic data. June gold futures last traded at $1,734.50 an ounce, down 1% on the day.
Chris Williamson, chief business economist at IHS Markit, said that investors and consumers should expect a long recovery after the coronavirus has completely devastated the economy.
“The sheer scale of the current downturn and associated job losses, and the fact that some restrictions will need to stay in place until an effective treatment or vaccine are found, highlights how a full recovery is unlikely to be swift,” he said. “We anticipate that GDP will decline at an annualised rate of around 37% in the second quarter, and it will take the economy two years to regain the prepandemic peak.”