On November 6, the latest U.S. services sector data revealed a modest recovery in economic activity during October, though persistent employment weakness and elevated prices continued to fuel market uncertainty, exerting both short-term and potential medium-to-long-term effects on the gold market. According to the latest figures from the Institute for Supply Management (ISM), the Services Purchasing Managers' Index (PMI) for October registered 52.4, up from 50 in September and surpassing economists' forecast of 50.8. This indicates that the U.S. services sector remains in expansion territory, with notable improvements in business activity and new orders. While such positive signals typically bolster economic confidence and financial market sentiment, their direct dampening effect on safe-haven assets like gold may be limited.
A PMI reading above 50 signifies economic expansion, while a figure below 50 indicates contraction, with deviations from 50 reflecting the magnitude of change. The Business Activity Index rebounded to 54.3 in October, up 4.4 percentage points from September's 49.9, while the New Orders Index reached 56.2—the highest level since October of last year. This suggests a recovery in corporate orders and business activity, which could temporarily weigh on gold prices. However, the Employment Index remained in contraction at 48.2, marking the fifth consecutive month below 50, signaling persistent weakness in hiring demand and reflecting subdued confidence in sustained economic growth.
The Prices Index stood at 70 in October, maintaining above 60 for the 11th straight month, underscoring lingering inflationary pressures. Elevated price levels imply rising business costs and continued pressure on consumer prices, an environment typically favorable for gold as investors turn to the metal to hedge against inflation risks. Meanwhile, the Supplier Deliveries Index dipped to 50.8, down 1.8 percentage points from September but still in expansion, indicating easing supply chain constraints. The Inventories Index contracted for the second consecutive month to 49.5, while the Inventory Sentiment Index expanded for the 30th straight month to 55.5. These mixed metrics highlight structural contradictions in the economic recovery, supporting gold's role as a hedge.
The Backlog of Orders Index remained in contraction for the eighth consecutive month at 40.8—the second-lowest level since 2009—pointing to lingering order fulfillment challenges. In October, 11 industries reported growth (up by one from September), while six industries remained in contraction. The overall PMI of 52.4 slightly exceeded the 12-month average of 51.7, though this average is the lowest since August 2024 and the second-lowest since 2010. Despite the rebound in business activity and new orders, sustained weakness in employment and backlogs suggests an uneven economic recovery, potentially enhancing gold's appeal as a safe-haven asset.
Following the data release, spot gold traded around $3,973.67 per ounce, up approximately 1.06% intraday. This reflects the market's nuanced reaction to the services data: while expansionary signals partially curbed safe-haven demand, high inflation, weak employment, and structural economic contradictions continue to underpin gold's long-term value. The rebound in U.S. services PMI may improve short-term sentiment, but structural uncertainties and inflationary pressures warrant caution, reinforcing gold's defensive role in asset allocation.
In summary, U.S. services data and gold prices exhibit a dynamic interplay: expansionary signals may temporarily suppress prices, while employment softness and inflation provide medium-to-long-term support. Investors should balance these indicators and monitor underlying trends to optimize gold allocation strategies amid market volatility, ensuring effective risk and return management.