Gold price near session highs following disappointing flash PMI data
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(Kitco News) - The gold market is seeing some new buying momentum as U.S. economic data continues to disappointing as preliminary estimates show slowing activity in both the manufacturing and service sectors.
Thursday, IHS Markit said its flash U.S. manufacturing Purchasing Managers Index for December dropped to a reading of 57.8, down from November’s reading at 58.3. Economists were expecting to see activity increase with the index rising to 58.6.
The report said that activity in the manufacturing sector is at a one-year low.
Meanwhile, momentum in the service sector also appears to be slowing. The report said that the Flash PMI for the service sector dropped to a reading of 57.5, down from November’s reading of 58.0. Economists were expecting activity to increase to 58.9.
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The report said that sentiment in the service sector is at a three-month low.
The gold market is trading near session high following the latest economic data. February gold futures last traded at $1,793.10 an ounce, up 1.61% on the day.
Chris Williamson, chief business economist at IHS Markit, said that although the headline numbers were disappointing, the data still points to a resilient economy faced with new threats from the COIVD-19 pandemic.
“Business growth slipped only slightly during the month and held up especially well in the vulnerable service sector. Manufacturing output growth even picked up slightly amid a marked easing in the number of supply chain delays, which also helped to take pressure off raw material prices. Barring the initial price slide seen at the start of the pandemic, December saw the steepest fall in factory input price inflation for nearly a decade,” he said.
Although price pressures in the manufacturing sector have eased, Williamson said that the service sector is still a growing concern.
“The worry is that rising wage growth, greater transport costs and higher energy prices have pushed service sector cost inflation to a new high, and that any renewed disruption to global supply lines resulting from the Omicron wave could lead to renewed upward pressure on goods prices,” he said.