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Gold Prices Ignore Mixed Flash IHS PMI Data

Kitco News

(Kitco News) - The gold market is holding on to recent gains, ignoring mixed sentiment in the U.S. manufacturing and service sector.

Thursday, research firm IHS Markit said its flash U.S. manufacturing Purchasing Managers Index for March increased to a reading of 55.7, up from February’s reading of 55.3. Economists were expecting to see only a modest change with consensus forecasts calling for 55.4.

The report noted that positive sentiment in the manufacturing sector is at its highest level in three years.

At the same time, the firm's service-sector PMI reading fell to a reading of 54.1, down from February’s reading of 55.9. Economists were expecting the index to remain unchanged. Sentiment in the service sector is at a four-month low, according to the report.

A monthly reading above 50 points to an expanding sector, while anything below that shows a contraction in activity.

Gold prices were holding strong gains ahead of the sentiment data and remain in positive territory in initial reaction. April gold futures last traded at $1,329.60 an ounce, up 0.61% on the day.

The gold market continues to benefit from weakness in the U.S. dollar after the Federal Reserve maintained its forecast that it will raise interest rates three times this year. While the central bank is in no hurry to aggressively raise interest rates, it was more optimistic on economic growth and the labor market.

“The flash PMI surveys indicate that the economy likely continued to expand at a robust pace in March, rounding off a solid opening quarter of the year. The surveys are running at a level consistent with annualized first quarter GDP growth approaching 2.5%," said Chris Williamson, Chief Business Economist at IHS Markit.

Positive for the gold market, the report noted a strong rise in inflation pressures, particularly within the manufacturing sector. According to the report, businesses are sees average costs increase because of rising raw material prices.

For many investors gold is seen as a traditional hedge against inflation.

"“Inflationary pressures meanwhile remain a key theme of the surveys, especially in manufacturing, reflecting increased raw material prices, notably for metals. The survey found average prices charged for goods and services are rising at one of the strongest rates seen since 2014. Furthermore, with factory costs showing the largest jump for seven years amid growing shortages of key inputs, inflationary pressures appear to be on the rise," said Williamson.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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