Gold price holding above $1,800 following mixed flash PMI data
(Kitco News) -The gold market is holding on to gains above $1,800 an ounce following mixed data on the health of the U.S. manufacturing and service sectors.
Friday, IHS Markit said its flash U.S. manufacturing Purchasing Managers Index for October fell to 59.2, down from September's reading of 60.7. The data was weaker than expected as economists forecasted relatively stable activity in the manufacturing sector.
The report noted that activity in the manufacturing sector is at a seven-month low.
Meanwhile, momentum in the service sector appears to be picking up. The report said that the Flash PMI for the service sector rose to 58.2, up from September's reading of 54.9. Economists were expecting to see a reading of around 55.
The report said that activity in the service sector is now at a three-month high.
The data hasn't significantly impacted gold prices as the market was above $1,800 an ounce before the data dropped. However, the precious metal has managed to hold on to its gains. December gold futures last traded at $1,807.60 an ounce, up 1.44% on the day.
"October saw resurgent service sector activity as COVID-19 case numbers continued to fall, marking an encouragingly strong start to the fourth quarter for the economy. Hiring has likewise picked up as firms have been encouraged to expand capacity to meet rising demand," said Chris Williamson, chief business economist at IHS Markit
Williamson, added that the global supply crunch and growing labor shortage is taking their toll on the manufacturing sector. He also noted that inflation pressures also continue to limit economic activity.
"Prices paid by factories for raw materials rose at yet another new record pace as a result, in turn feeding through to both higher prices at the factory gate and spilling over into higher service sector prices. Higher wages are also having to be offered to attract or retain staff, adding to the inflationary pressures," he said. "Thus, while the economy looks set for stronger growth in the fourth quarter, the upward rise in inflationary pressures also shows no signs of abating."
Commodity analysts have noted that rising inflation pressures have saved a lackluster gold market this year. Bond yields are rising in anticipation of tighter monetary policy from the Federal Reserve. The U.S. central bank is expected to reduce its monthly bond purchases before the end of the year. However, rising inflation has pushed real yields modestly lower in recent gains, supporting gold prices.
By Neils ChristensenFor Kitco News
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