Gold Prices Ignore Rise In Flash PMI Data
(Kitco News)- The gold market is holding on to modest gains as preliminary data shows improving sentiment in the U.S. manufacturing and service sector.
Wednesday, research firm IHS Markit said in its The flash U.S. manufacturing Purchasing Managers Index for February to a reading of 55.9, up from January's reading of 55.5.Economists were expecting to see only a modest change with consensus forecasts calling for 55.4.
At the same time, the firm's service sector PMI reading also increased to a reading of 55.9, up from January's reading of 53.8. Economists were expecting the index to rise to 53.3.
Any monthly reading above 50 points to an expanding sector, while anything below that shows a contraction in activity.
Gold prices were holding near session highs ahead of the sentiment data and remain in positive territory in initial reaction. April gold futures last traded at $1,332.80 an ounce, up 0.14% on the day.
The report noted that sentiment in the manufacturing sectoris at its highest level in 40 months. Sentiment in the service sector is at asix-month high. The report noted sharp increases in both manufacturingproduction and service sector activity, which in turn is creating robust growthin the labor market.
"Business activity growth accelerated markedly inFebruary, suggesting the economy is growing at its fastest pace for over twoyears. The upbeat February PMI surveys are indicative of GDP rising at anannualised rate of 3.0%," said Chris Williamson, chief business economistat IHS Markit. "Even faster growth is signalled for coming months.February saw the largest influx of new orders for almost three years, whilebusiness expectations about the year ahead jumped to the highest since May2015."
While economic activity is expanding at a strong clip,positive for gold, the report noted that inflation pressures are also pickingup. Gold is seen as a traditional hedge against inflation. Analysts have notedthat rising inflation is keeping real interest rates low, making the yellowmetal an attractive alternative asset.
The research firm noted that prices pressures saw theirsharpest rise since July 2013.
By Kitco NewsFor Kitco News
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