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Gold prices holding steady as flash U.S. PMI shows mixed health in manufacturing, service sectors

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(Kitco News) - The gold market remains caught in relatively neutral territory as activity in the U.S. service sector weighs on the economy according to preliminary report from S&P Global.

Friday, the S&P Global Flash U.S. manufacturing PMI data remained in contraction territory in September but has managed to see better-than-expected improvement, rising to 48.9, up from August’s reading of 47.9. According to consensus estimates, economists were looking for a print of around 48.2.

The report said that activity in the U.S. manufacturing sector has risen to a two-month high.

Meanwhile, the service sector PMI, while remaining in expansion territory, continues to see slowing activity, falling to 50.2., down from last month's reading of 50.5. According to consensus forecasts economists were looking for a slight increase to 50.7.

The gold market is not seeing much reaction to the mixed economic data as prices hover just below $1,950 an ounce. December gold futures last traded at $1,946 an ounce, up 0.33% on the day.

The report highlighted rising stagflation risks as economic activity remains constrained and prices remains stubbornly elevated.

“PMI data for September added to concerns regarding the trajectory of demand conditions in the US economy following interest rate hikes and elevated inflation. Although the overall Output Index remained above the 50.0 mark, it was only fractionally so, with a broad stagnation in total activity signalled for the second month running. The service sector lost further momentum, with the contraction in new orders gaining speed,” said a, Siân Jones, principal economist at S&P Global Market Intelligence, in the report.

Jones also noted that inflation remains a threat to demand heading into year-end.

“Inflationary pressures remained marked, as costs rose at a faster pace again. Higher fuel costs following recent increases in oil prices, alongside greater wage bills, pushed operating expenses up. Weak demand nonetheless placed a barrier to firms’ ability to pass on greater costs to clients, with prices charged inflation unchanged on the month.”

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