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Gold Prices Remain Down Following Mix Preliminary U.S. PMI Data

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(Kitco News) - The gold market is off its daily lows but remains under pressure following preliminary mixed manufacturing and service sector sentiment data.

Friday, research firm IHS Markit said in its latest flash U.S. manufacturing Purchasing Managers Index for September dropped to a reading of 52.9 compared to August’s reading of 54.7. Consensus forecasts showed economists were forecasting a reading around 55.1.

The report noted that sentiment in the manufacturing sector is at an 18-month low.

At the same time, the firm’s service sector PMI reading was stronger than expected, showing a reading of 55.6, up compared to August’s reading of 54.8. Economists were projecting the index to remain relatively unchanged at 54.9.

Sentiment in the service sector is at its highest level in 4 months.

The firm's composite output index dropped to a reading of 53.4, down from August's level of 54.7. its lowest level in 17 months.

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

The gold market has been ignoring recent economic data, taking its cues from U.S. dollar flows. The market has seen little reaction to the latest report. December gold futures last traded at 1,199.20 an ounce, down 1% on the day.

The report noted that some of the weakness in manufacturing sector could be weather related as some companies shutdown production ahead Hurricane Florence, which hit the U.S. last week.

“With storms hitting the east coast, it was no surprise to see some disappointing survey data in September, with the flash PMI indicating that the pace of economic growth slipped to its lowest for almost one-and-a-half years,” said Chris Williamson, chief business economist at IHS Markit. “However, business activity remained encouragingly resilient during the month, commensurate with third-quarter GDP growing at an annualised rate approaching 3%.”

In further headwinds for the U.S. economy,  many business were concerned about the U.S. government’s escalated trade war with China.

“The escalation of trade wars, and the accompanying rise in prices, contributed to a darkening of the outlook, with business expectations for the year ahead dropping sharply during the month,” said Williamson. “While business activity may rebound after the storms, the drop in optimism suggests the longer-term outlook has deteriorated, at least in the sense that growth may have peaked.”

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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