Preliminary economic data indicating a modest recovery in both the service and manufacturing sectors could limit gold’s appeal as a safe-haven asset, industry observers say.
On Tuesday, S&P Global reported its flash Purchasing Managers Index (PMI) for May showed stronger-than-expected growth. The service sector PMI rose to 52.3 from 50.8 in April, surpassing economists’ forecasts of around 51. The manufacturing sector also improved notably, with its PMI climbing to 52.3 from 50.2, defying expectations of contraction.
While these figures ease fears of a sharp economic slowdown, sentiment remains cautious. The report highlighted that concerns over tariffs continue to weigh heavily on demand, supply chains, and pricing.
“US business activity growth and future output expectations improved from April’s lows, but remain historically subdued amid worries about tariffs’ impact,” the report stated.
In response, gold prices faced renewed selling pressure, struggling to maintain key near-term resistance. Spot gold dropped 0.63% to $3,292.70 an ounce.
Tariffs imposed under President Donald Trump continue to cast a shadow, contributing to price surges unseen since August 2022. The report attributed these price hikes largely to tariff-related costs.
Despite improved optimism, uncertainty persists. Supply issues, rising prices, and concerns over government policies, including tariffs and spending cuts, keep overall confidence below 2024 averages.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that some economic activity may be front-loaded due to an approaching 90-day tariff deadline. He also highlighted record-high input inventories and widespread supply chain delays.
“Supply chain delays are now more widespread than any time since the 2022 pandemic shortages, with firms passing tariff levies to customers through higher prices for goods and services,” Williamson said.
