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(Kitco News) - The gold market has been unable to hold support around $2,000 an ounce, with stronger-than-expected manufacturing and service sector data adding to the current selling pressure.
Friday, the S&P Global Flash U.S. manufacturing PMI data rose to 50.4, up from March's reading of 49.2. According to consensus estimates, economists were looking for a relatively unchanged reading.
This is the first time the manufacturing index has moved into expansion territory since September.
Meanwhile, activity in the service sector was also more robust than expected, rising further into expansion territory to 53.7., up from last month's reading of 52.6. Economists were looking for a print around 51.5. Activity in the service sector is at its highest level in 12 months, the report said.
Readings above 50 in such diffusion indexes are seen as a sign of economic growth and vice-versa. The farther an indicator is above or below 50, the greater or smaller the rate of change.
The gold market was seeing some solid technical selling pressure ahead of the latest economic data, which has now picked up in initial reaction. June gold futures last traded at $1,989.70 an ounce, down nearly 1.5% on the day.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said that although the increase in economic activity is being led by the service sector, the report shows growing broad-based strength.
"The latest survey adds to signs that business activity has regained growth momentum after contracting over the seven months to January. The latest reading is indicative of GDP growing at an annualized rate of just over 2%," he said.
However, Williamson noted that the pick-up in activity is coming at a cost as inflation threatens to be embedded in the economy.
"Average prices charged for goods and services rose in April at the sharpest rate since September of last year, the rate of inflation having now accelerated for three successive months. This increase helps explain why core inflation has proven stubbornly elevated at 5.6% and points to a possible upturn – or at least some stickiness – in consumer price inflation," he said.
