(Kitco News) - While off its highs, gold continues to hold solid gains within striking distance of fresh all-time highs as economic activity led by the service sector continues to weaken.
S&P Global reported on Monday that its flash Purchasing Managers Index (PMI) for the service sector dropped to 52.8 in January, down from December’s revised reading of 56.8.
The report said that activity in the U.S. service sector dropped to a nine-month low.
Meanwhile, activity in the manufacturing sector remains fairly neutral with the Flash PMI rising to 50.1, up from December’s reading of 49.4.
Activity in the manufacturing sector has moved into expansion territory for the first time in six months.
The gold market is not seeing much reaction to the mixed economic data as it continues to see solid gains for the week. Spot gold last traded at $2,777 an ounce, up nearly 1% on the day.
In a composite of the two indexes, the report said that economic output while growing has dropped to a nine-month low.
“US businesses are starting 2025 in an upbeat mood on hopes that the new administration will help drive stronger economic growth. Rising optimism is most notable in the manufacturing sector, where expectations of growth over the coming year have surged higher as factories await support from the new policies of the Trump administration, though service providers are also entering 2025 in good spirits,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence in the report. “Although output growth slowed slightly in January, sustained confidence suggests that this slowdown might be short-lived.”
While there is growing optimism in the U.S. economy, Williamson said that there are still risks.
“Rising price pressures are a concern, with companies reporting supplier-driven price hikes as well as wage growth amid poor staff availability. Higher input cost and selling price inflation was broad-based across goods and services and, if sustained, could add to worries that a combination of robust economic growth, a strong job market, and higher inflation could encourage a more hawkish policy approach from the Fed,” he said.
