(Kitco News) – The gold market remains under pressure but is seeing little movement heading into the weekend as positive economic data and improving sentiment weighs on the precious metal.
Friday, flash estimates from IHS Markit showed sentiment in both the manufacturing sector and in the service sector rose stronger than expected.
The research firm said U.S. manufacturing Purchasing Managers Index for January rose to a reading of 59.1 up from December’s reading of 57.1 Consensus forecasts were calling for a reading around 56.6. The report said that this was the highest reading on record.
Meanwhile the firm’s service-sector PMI reading rose to a reading of 57.5, up from Decembe’s reading of 54.8. The data was better than expected with consensus forecasts calling for a reading around 53.3.
The gold market was under significant selling pressure ahead of the report but has seen little movement in initial reaction to the better-than-expected data. February gold futures last traded at $1,842.90, down 0.88% on the day.
Chris Williamson, chief business economist at IHS Markit, noted that growing optimism that vaccines will help the U.S. economy recovery faster than expected is boosting economic activity.
“Output growth accelerated in January to the second-fastest in almost six years, and business optimism about the year ahead surged higher. Over the past three months, business sentiment has been running at its highest since the start of 2015,” he said.
While the latest economic data are better than expected, the increased activity is not coming without a cost. Williamson noted that inflation pressures are rising, which will be a major support for gold prices.
“Capacity constraints are biting amid the growth spurt. Not only have the last two months seen supply shortages develop at a pace not previously seen in the survey’s history, but prices have also risen due to the imbalance of supply and demand. Input cost inflation consequently also hit a survey high and exerted further upward pressure on average selling prices for goods and services,” he said.
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