Spot gold rises from session lows as flash S&P composite PMI improves to 52.2

S&P Global reported on Tuesday that its flash Composite Purchasing Managers Index (PMI) rose to 52.2 in June, up from May’s reading of 51.5. The number was above expectations, as economists had forecasted a reading of 50.8.

“US business activity growth improved for a third successive month in June,” the report noted. “However, the rate of growth remained weaker than at the start of the year. Companies also cut back on their staffing levels amid concerns over the outlook and in response to rising overheads, notably in terms of raw material prices. Input price inflation cooled but remained historically high, leading to an unchanged elevated rate of selling price inflation.”

“The survey also showed an unbalanced economy, as sluggish demand for services contrasted with historically strong growth in demand for manufacturing goods, although the latter was again buoyed by precautionary stock building amid increasingly widespread supply issues.”

The PMI for the service sector rose to 51.3 in June, up from January’s reading of 50.7. Activity in the service sector was also above expectations, as economists had forecasted a reading of 50.9.

The U.S. manufacturing sector also improved. According to the report, the PMI for the manufacturing sector rose to 55.7, up from May’s reading of 55.1, and also above the consensus forecast of 54.1.

The gold market was pulling off the session lows following the North American open and the latest PMI data. Spot gold last traded at $4,134.53 per ounce for a loss of 1.56% on the daily chart.

“Brighter news out of the Middle East has helped restore some confidence among US businesses in June, though the overall rate of economic growth signalled by the flash PMI survey remains relatively sluggish compared to that seen earlier in the year in the lead up to the conflict,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. “The survey signals that current output levels are consistent with the economy struggling to grow much faster than a 1% annualized rate in the second quarter.”

Williamson noted that the service sector continued to grow at a particularly subdued pace, reflecting customers’ dissatisfaction with high prices and low levels of consumer confidence. “While there is better news from the manufacturing sector, we remain concerned as factory growth continues to be temporarily buoyed by inventory building amid supply fears,” he said.

“Most worrying was the further fall in employment, notably in the manufacturing sector,” Williamson wrote. “Factory job cuts are running at the highest since 2009 if the pandemic is excluded, reflecting concerns over the sustainability of the recent upturn in demand alongside worries over the escalating cost of raw materials. However, while still running at one of the highest rates seen over the past four years, input cost inflation has shown signs of cooling in June thanks in part to the lower energy prices seen at the tail end of the survey data collection period.”