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(Kitco News) - Gold prices are holding near-session highs as the U.S. manufacturing sector falls deeper into contraction territory and activity in the service sector remains relatively flat.
Friday, the S&P Global Flash U.S. manufacturing PMI data fell sharply to a reading of 46.3, down from May's reading of 48.4. According to consensus estimates, economists were looking for a relatively unchanged reading.
The report said that activity in the U.S. manufacturing sector has dropped to its lowest level in six months.
Meanwhile, the service sector PMI remains in expansion territory even as activity slows to 54.1., down from last month's reading of 54.9. The data was relatively in line with expectations, as consensus forecasts called for a drop to 53.9.
The gold market saw solid bullish momentum ahead of the mixed economic data as prices bounced off a four-low at $1,919.50 an ounce. According to analysts, the precious metal continues to benefit from shifting momentum in the U.S. dollar.
August gold futures last traded at $1,944.40 an ounce, up 1% on the day.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said in the report that despite the slower activity, the data points to resilient economic growth of 2% in the second quarter.
"Growth remains dependent on service sector spending, however, with manufacturing slipping back into decline after three months of growth. While improving supply conditions had helped boost manufacturing production in prior months, an increasingly severe downturn in new orders means factories are running out of work," Williamson said. "The question remains as to how resilient service sector growth can be in the face of the manufacturing decline and the lagged effect of prior rate hikes. Any further rate hikes will, of course, have a further dampening effect on this sector which is especially susceptible to changes in borrowing costs."
Although tightness in the labor market continues to add to inflation, Williamson said that it is encouraging to see the overall rate of selling pressure dropping to its lowest level since late 2020.
