Gold prices continue to trade near session highs as U.S. economic data reveals a mixed performance across key sectors. While the manufacturing sector contracted further, the service sector showed resilience, albeit with a slight decline.
According to S&P Global’s latest flash Purchasing Managers Index (PMI) report, the service sector’s index for September fell slightly to 55.4, down from 55.7 in August, marking a two-month low. The service sector remains relatively steady, supporting economic growth.
However, the manufacturing PMI dropped to 47, compared to August’s reading of 47.9, falling below expectations of 48.6. This marks the manufacturing sector’s lowest point in 15 months, signaling ongoing contraction.
Gold prices responded positively to the data, with December futures last trading at $2,658.70 per ounce, up 0.48% on the day.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that while overall GDP growth remains healthy at an estimated annualized rate of 2.2% in the third quarter, the economy’s reliance on the service sector for expansion and a decline in business confidence raise concerns.
“Manufacturing is still in decline, and business confidence is dropping, which are warning signs,” said Williamson. He also highlighted inflationary pressures, as prices for goods and services rise at the fastest pace in six months. “The Federal Reserve may need to tread carefully in future rate cuts, especially as input costs in the service sector—driven largely by wages—are rising at the highest rate in a year,” Williamson added.
The mixed data underscores the ongoing economic challenges as the Federal Reserve balances growth with inflation control, keeping gold on solid footing as a hedge against uncertainty.
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