The gold market continues to see some technical selling pressure as better-than-expected data economic data is prompting some investors to take profits at fresh nine-month highs.
Tuesday, the S&P Global Flash US Composite PMI reported better-than-expected activity for the manufacturing service sectors, even as both indexes remain in deep contraction territory.
The report said that the manufacturing PMI data rose to 46.8, up from December’s reading of 46.2. The data beat expectations; according to consensus estimates, economists were looking for a reading of around 46.
Meanwhile, activity in the service sector increased in January, rising to 46.6, up from December’s reading of 44.7. Economists were looking for a print around 45.3.
The gold market, while off its highs, is trying to hold on to its overnight gains following the economic data. February gold futures last traded at $1,928.60 an ounce,roughly unchanged on the day.
Although the headline data ticked higher in January, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said recession risks continue to grow.
“The US economy has started 2023 on a disappointingly soft note, with business activity contracting sharply again in January. Although moderating compared to December, the rate of decline is among the steepest seen since the global financial crisis, reflecting falling activity across both manufacturing and services,” he said in the report.
The report also noted that despite the weak activity, inflation remains elevated.
“The worry is that, not only has the survey indicated a downturn in economic activity at the start of the year, but the rate of input cost inflation has accelerated into the new year, linked in part to upward wage pressures, which could encourage a further aggressive tightening of Fed policy despite rising recession risks,” Williamson said.