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Gold prices trade near session lows strong S&P flash PMI data helping to weigh on market

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(Kitco News) – Bearish sentiment finally seems to be catching up with the gold market, as stronger-than-expected activity in the manufacturing and services sectors and technical selling pressures keep prices close to the lowest level.

On Friday, the S&P Global Flash US Composite PMI reported a healthy increase in services activity. According to the report, manufacturing PMI data came in at 51.8, up from the August reading of 51.5. The data was better than expected; according to consensus estimates, economists were looking for a value around 51.

Manufacturing activity is at its highest point in two months, according to the report.

Meanwhile, activity in the services sector is also showing solid momentum, rising to 49.2 from August’s reading of 43.7. Economists were looking for a print around 45.5.

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Service sector activity is at its highest level in three months, the report said.

The gold market is unable to find bullish momentum and prices are seeing sharp losses on Friday. December gold futures last traded at $1,653 an ounce, down 1.67% on the day.

“While production fell in September in both manufacturing and services, the pace of contraction slowed in both cases compared to August, particularly in the services sector, with order books returning to modest growth, raising some concerns about the depth of the current downturn was taken away,” said Chris. Williamson, chief business economist at S&P Global Market Intelligence in the report.

Williamson added that while production improved slightly, September will complete the western quarter of economic growth since the 2008 financial crisis.

The report also noted that inflationary pressures are improving.

“There was also better news on inflation, with supplier shortages falling to the lowest level since October 2020, helping to ease pressure on commodity prices. These improved supply chains, accompanied by the marked decline in demand since earlier this year, helped push both companies’ cost inflation and average sales prices for goods and services down to their lowest since early 2021,” Williamson said. inflationary pressures nevertheless remain high by historical standards and, as business activity slows, surveys continue to paint a broad picture of an economy struggling in a stagflationary environment.”

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According to some market analysts, the latest economic data shows that the US economy remains resilient in the face of rising interest rates, which could force the Federal Reserve to continue with super-large rate hikes to curb inflation.

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“Is this a situation where good news is bad news? The Fed wants demand to fall and services to rise,” said Adam Button, chief currency strategist at Forexlive.com.

The central bank’s aggressive monetary policy stance will continue to be a headwind for gold.


Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; nor Kitco Metals Inc. neither the author can guarantee such accuracy. This article is for informational purposes only. It is not a request to exchange commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article assumes no liability for losses and/or damages arising out of the use of this publication.

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