(Kitco News) - Gold prices are off their highs but remain well supported, as falling demand continues to weigh on U.S. economic activity. Both the U.S. manufacturing and service sectors are losing momentum in line with expectations.
S&P Global reported Monday that its flash Purchasing Managers Index (PMI) for the service sector fell in September to 53.9, down from August’s downwardly revised reading of 54.5. Economists had expected a reading of around 54.0.
The report noted that service sector activity has dropped to a three-month low.
At the same time, the manufacturing sector continues to contract, with the flash PMI falling to 52.0, down from last month’s reading of 53. Economists were looking for a slightly smaller decline to 52.2.
Manufacturing activity has fallen to a two-month low, the report said.
“While growth was again seen across both manufacturing and service sectors, both categories reported weakened expansions, leading to slower hiring in both cases,” the report said.
The gold market is seeing little reaction to the relatively muted economic data, with some limited technical profit-taking. Spot gold last traded at $3,777.50 an ounce, up 0.88% on the day.
Although momentum is slowing, the report said activity should still be enough to drive the strongest average monthly expansion in the third quarter since the fourth quarter of 2024.
“Further robust growth of output in September rounds off the best quarter so far this year for US businesses. PMI survey data are consistent with the economy expanding at a 2.2% annualized rate in the third quarter. However, the monthly profile is one of growth having slowed from its recent peak back in July, and September saw companies also pull back on their hiring,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. “The inventory build-up of course, also hints at some downside risks to future production. While growth expectations across both manufacturing and services also continue to be dogged by concerns over the political environment, and especially tariffs, September encouragingly saw business sentiment improve in part due to the anticipated beneficial impact of lower interest rates.”
While growth is slowing, the report also noted that price pressures are starting to ease. However, Williamson added that the data still points to inflation holding above the Federal Reserve’s 2% target.
“Manufacturing input price inflation remained elevated at one of the highest rates since the pandemic, albeit dipping slightly since August. Service sector inflation, meanwhile, hit the second-highest recorded over the past 27 months,” the report said.
