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(Wallace Refiners) – The gold market is holding on to gains as technical buying momentum helps the precious metal overcome steady growth in both the U.S. manufacturing and service sectors.
Friday, IHS Markit said its flash U.S. manufacturing Purchasing Managers Index for February dropped to a reading of 58.5, down from January’s reading of 59.2. The data were in line with expectations; economists were expecting to see a reading of 58.4.
Simultaneously, the firm’s service sector PMI reading rose to a reading of 58.9, up from January’s reading of 58.2. Economists were forecasting the index to come in at 57.9.
The report said that activity in the service sector rose to its highest level in 71 months.
Despite the slightly better-than-expected data, gold prices are holding on to small gains heading into the weekend. April gold futures last traded at $1,786.90 an ounce, up 0.67% on the day.
While the headline data is negative for gold, the economic activity is not coming without a cost. The report noted that inflation pressures continue to rise, which is a positive factor for gold.
Analysts have said that gold is ignoring economic data as it sees a technical bounce after falling to an eight-month low overnight.
While the headline data is negative for gold, the economic activity is not coming without a cost as input prices rose sharply in the month. The report noted that inflation pressures continue to increase, which is a positive factor for gold.
“Firms raised their selling prices at the sharpest rate on record (since October 2009), with panelists stating the increase was due to the partial pass-through of greater costs to clients,” the report said.
“Despite headwinds of COVID-19, extreme weather and record supply chain delays, U.S. businesses reported the fastest output growth for almost six years in February,” said Chris Williamson, chief business economist at IHS Markit in the report. “The data add to signs that the economy is enjoying a strong opening quarter to 2021, buoyed by additional stimulus and the partial reopening of the economy as virus-related restrictions were eased on average across the country.”
Williamson added that rising inflation pressures are a concern.
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