(Kitco News) - The gold market is holding solid support above $4,000 an ounce as healthy economic activity in both the manufacturing and service sectors could impact gold’s bullish momentum and safe-haven allure.
S&P Global reported on Friday that its flash Purchasing Managers Index (PMI) Composite Output Index increased to 54.8, rising to its highest level in four months.
The increase was driven by solid momentum in the service sector. The Service Sector PMI rose to 55.0, up from October’s reading of 54.8. According to consensus estimates, economists were looking for a relatively unchanged reading of 54.6.
At the same time, the Manufacturing PMI data fell slightly to 51.9, down from October’s reading of 52.5. The data was in line with expectations and despite the drop the sector remains in expansion territory.
“The flash PMI data point to a relatively buoyant US economy in November, signalling annualised GDP growth of about 2.5% so far in the fourth quarter. The upturn also looks encouragingly broad-based for now, with output rising across both manufacturing and the vast services economy,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
The gold market is not seeing any significant moves in its initial reaction to the latest economic data. Spot gold last traded at $4,071.70 an ounce, down 0.12% on the day.
Although the data continues to point to a resilient economy, Williamson noted that the report also highlighted some concerns growing in the market.
“Manufacturers reported a worrying combination of slower new orders growth and a record rise in finished goods stock. This accumulation of unsold inventory hints at slower factory production expansion in the coming months unless demand revives, which could in turn feed through to lower growth in many service industries,” he said.
“Furthermore, although jobs continued to be created in November, the rate of hiring continues to be constrained by worries over costs, in turn linked to tariffs. Both input costs and selling prices rose at increased rates in November, which will be of concern to the inflation hawks,” he added.
