Gold price holding massive gains, ignores mixed U.S. flash PMI data
(Kitco News) -The gold market is ignoring the latest economic data as price gold on to 6% gains on the day even after preliminary data showed mixed sentiment with the U.S. manufacturing and service sectors.
Tuesday, IHS Markit said its flash U.S. manufacturing Purchasing Managers Index for March dropped to a reading of 49.2, down from February’s reading of 50.7. However the data were better than expected. Economists were expecting to see a reading of 45.1. Although sentiment in the manufacturing sector was better than expected, IHS noted that it is at its lowest level in 127 months.
At the same time, the firm’s service sector PMI reading fell to 39.1, down from February’s reading of 49.4. Economists were forecasting the index to come in at 44.1. IHS said that this is the lowest sentiment reading in the survey’s history.
The latest economic data is having little impact on gold prices as the market is still focused on the extraordinary measure the Federal Reserve took Tuesday, announcing an open-ended quantitative easing program.
April gold futures last traded at $1,665.50 an ounce, up 6.25% on the day.
Economists have noted that the spreading coronavirus is having a more significant impact on the service sector because stories have been shut down and nearly 1 in 5 Americas are in lockdown in an attempt to slow the spread of the virus.
“The service sector has been especially badly affected, with consumer-facing industries such as restaurants, bars and hotels bearing the brunt of the social distancing measures, while travel and tourism has been decimated,” said Chris Williamson, chief business economist at IHS Markit.
At the same time Williamson warned that the U.S. economy is probably already in a recession.
“The March PMI is roughly indicative of GDP falling at an annualised rate approaching 5%, but the increasing number of virus-fighting lockdowns and closures mean the second quarter will likely see a far steeper rate of decline,” he said.