(Kitco News) - The gold market continues to tread water above $3,000 an ounce as the U.S. economy sends mixed signals with further declines in manufacturing activity and growth in the service sector.
S&P Global reported on Monday that its flash Purchasing Managers Index (PMI) for the service sector rose in March to 54.3, up from February’s reading of 51.0. The data beat expectations, as economists had called for a reading of around 51.2.
The report said that activity in the service sector has risen to a three-month high.
Meanwhile, activity in the manufacturing sector continues to contract, with the flash PMI falling to 49.8, down from last month’s reading of 52.7. Economists were looking for a smaller drop to 51.9.
The report said that activity in the manufacturing sector dropped to a three-month low.
The gold market is not seeing much reaction to the mixed economic data. Spot gold last traded at $3,019.90 an ounce, down 0.12% on the day.
While the U.S. economy remains relatively healthy, the report noted that sentiment on future growth continues to weaken.
“Although current output growth picked up pace in March, optimism about the coming year fell for a second successive month. The decline took confidence to its lowest since October 2022, barring the nadir seen last September (when business was unsettled by uncertainty ahead of the Presidential election),” the report said.
At the same time, the report also noted that price pressures are rising, adding to persistent inflation fears.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that despite improved activity in the service sector, overall growth continues to slow.
“Near-term risks also seem tilted to the downside. Growth is concentrated in the service sector as manufacturing fell back into decline after the front-running of tariffs had temporarily boosted factory output in the first two months of the year. Similarly, some of the March upturn in services was reportedly due to business picking up after adverse weather conditions had dampened activity across many states in January and February, which could prove a temporary bounce,” he said in the report.
Williamson also noted that government policies and President Donald Trump’s tariffs on imported goods are impacting sentiment, which in turn is weighing on growth.
“A key concern over tariffs is the impact on inflation, with the March survey indicating a further sharp rise in costs as suppliers pass tariff-related price hikes on to U.S. companies. Firms' costs are now rising at the steepest rate for nearly two years, with factories increasingly passing these higher costs onto customers,” he said.
