(Kitco News) - The gold market appears fatigued, holding near record highs despite mixed U.S. economic data: the service sector is growing while manufacturing continues to contract.
Wednesday, S&P Global said its flash Purchasing Managers Index for the service sector rose to 55.2 in August, relatively unchanged from July’s reading at 55.0. Activity in the service sector was stronger than expected, as economists forecasted a reading of 54.
The report said that activity in the service sector has risen to a 2-month high.
However, the report also said that the manufacturing sector’s PMI Index contracted to 48, down from July’s reading of 49.6. According to consensus estimates, economists were expecting to see a roughly unchanged reading.
Activity in the manufacturing sector has dropped to an eight-month low.
The mixed economic data is having little impact on gold as it continues to consolidate at elevated levels. December gold futures last traded at $2,519.30 an ounce, down 1% on the day.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said that while the headline data continues to support the economy and normalizing inflation, cracks are forming below the surface.
“This ‘soft-landing’ scenario looks less convincing, however, when you scratch beneath the surface of the headline numbers. Growth has become increasingly dependent on the service sector as manufacturing, which often leads the economic cycle, has fallen into decline. The manufacturing sector’s forward-looking orders-to-inventory ratio has fallen to one of the lowest levels since the global financial crisis,” he said in the report. “At the same time, service sector growth is constrained by hiring difficulties, which continue to push up pay rates and means overall input cost inflation remains elevated by historical standards.”
