Gold price testing support following mixed flash PMI data
(Kitco News) - The gold market is struggling to attract new bullish momentum and is trying to hold support around $1,800 an ounce, following mixed sentiment in the U.S. manufacturing and service sectors.
Friday, IHS Markit said its flash U.S. manufacturing Purchasing Managers Index for July increased to a reading of 63.1, up from June's reading of 62.1. Economists were expecting to see relatively unchanged sentiment in the manufacturing sector.
The report noted that this is a new record high for activity within the manufacturing sector.
Meanwhile, momentum in the service sector appears to be slowing. The report said that the Flash PMI for the service sector dropped to a reading of 59.8, down from June's reading of 64.6. Economists were expecting sentiment to remain unchanged.
The report said that activity in the service sector has dropped to a five-month low.
The gold market is not seeing much reaction to the latest economic data. The precious metal's price action continues to be dominated by technical flows. August gold futures last traded at $1,801.50 an ounce, down 0.22% on the day.
Some economists have noted that a new wave of the COVID-19 Delta variant is starting to sweep through the U.S., which could be impacting economic activity, particularly in the service sector.
However, Chris Williamson, chief business economist at IHS Markit, said that the slowdown in the service sector is not surprising as the economy finds a new balance after last year's nationwide shutdown.
He added that although momentum is slowing, the data still points to robust through the second half of the year.
"The provisional PMI data for July point to the pace of economic growth slowing for a second successive month, though importantly this cooling has followed an unprecedented growth spurt in May. Some moderation of service sector growth in particular was always on the cards after the initial reopening of the economy, and importantly we're now seeing nicely-balanced strong growth across both manufacturing and services," he said in the report.
"While the second quarter may therefore represent a peaking in the pace of economic growth according to the PMI, the third quarter is still looking encouragingly strong," he added.
Williamson also noted that rising price pressures remain a concern for economic growth.
"Inflationary pressures and supply constraints – both in terms of labour and materials shortages - nevertheless remain major sources of uncertainty among businesses, as does the delta variant, all of which has pushed business optimism about the year ahead to the lowest seen so far this year. The concern is this drop in confidence could feed through to reduced spending, investment and hiring, adding to the possibility that growth could slow further in coming months," he said.