(Kitco News) - Gold prices sold off sharply after the private sector in the United States showed significant improvement to start the year.
The S&P Global Flash US Composite PMI came in at 52.3 in January, above December’s final reading of 50.9 and marking the fastest rise in business activity since June 2023.
“An encouraging start to the year is indicated for the US economy by the flash PMI data, with companies reporting a marked acceleration of growth alongside a sharp cooling of inflation pressures,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence in the report.
Spot gold fell from $2,029.11 just before the release to a session low of $2,019.20 in the minutes following its publication. Spot gold last traded at $2,021.69, down 0.37% on the day.
Output growth was led by the service sector, with the Services Business Activity Index improving to 52.9 in January after December’s 51.4 reading. Manufacturing firms continued to see weaker activity in January, with the Manufacturing Output Index coming in at 48.7, slightly above December’s 48.1 reading but still in contractionary territory.
The Manufacturing PMI rose into expansion and posted a 15-month high at 50.3 in January, up from December’s 47.9 reading. The data were collected between January 11-23, 2024.
“Output measured across both goods and services rose in January at the fastest rate since last June, growth momentum having stepped up a gear on the back of improved demand conditions,” Williamson wrote. “New orders inflows have now picked up for three months, buoyed in particular by improving sales to domestic customers, helping lift business confidence about the year ahead to the most optimistic since May 2022.”
On the price front, input cost inflation pulled back to and was the second-lowest since October 2020, while average prices charged for goods and services rose the least since May 2020.
There was significant divergence between sectors, however, as service providers saw the slowest rise in output charges since June 2020 while manufacturers raised their output prices at the steepest rate since April 2023 as firms sought to pass higher costs along to customers.
“Confidence has also been buoyed by hopes of lower inflation in 2024, easing the cost of living squeeze and facilitating the path to lower interest rates,” Williamson said. “With prices rising in January at the slowest rate since the initial pandemic lockdowns of early 2020, companies report that selling price inflation is now below the pre-pandemic average and consistent with consumer price inflation dropping below the Fed’s 2% target.”
“With the survey indicating that supply delays have intensified while labor markets remain tight, cost pressures will need to be monitored closely in the coming months,” he added, but said the January survey sends “a clear and welcome message of resilient economic growth and sharply waning inflation.”
The S&P Global Composite PMI Output Index is a weighted average of the Manufacturing Output Index and the Services Business Activity Index which tracks business trends across both manufacturing and service sectors. The index is based on data collected from a representative panel of over 800 companies and follows variables such as sales, new orders, employment, inventories and prices. A reading above 50 indicates expansion in business activity while below 50 points to contraction.
