Gold prices down and holding support around $1,750 following strong reading in ISM Service-Sector PMI

Gold prices down and holding support around $1,750 following strong reading in ISM Service-Sector PMI

Kitco News

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(Kitco News) - Gold prices remain under pressure, testing support just above $1,750 an ounce as the U.S. service sector saw stronger than expected momentum in September, according to the latest data from the Institute for Supply Management (ISM).

Tuesday, the ISM said its non-manufacturing index showed a reading of 61.9% last month, up from August’s reading of 61.7%. The data was more robust than expected, as consensus forecasts were calling for a reading around 59.9%.

The better-than-expected economic data is having a little impact on gold prices as it continues to trade near session lows. December gold futures last traded at $1,753.30 a ounce, down 0.80% on the day.

Adam Button, chief currency strategist at noted that the positive surprise in the latest ISM data is pushing both the U.S. dollar and bond yields higher, both are negative factors for the gold market.

Looking at some of the components of the report, the Business Activity/Production Index increased to a reading of 62.3%, up from August’s reading of 60.1%. At the same time New Orders rose to 63.5%, up from the previous level of 63.2%.

However, the labor market in the service sector lost some momentum last month. The report said that the Employment Index dropped to a reading of 53.0, down from August’s level of 53.7%.

Labor market data has been attracting a lot of attention late as it is one of the factors the Federal Reserve is watching as it prepares to shift its monetary policy and start reducing its monthly bond purchase before the end of the year.

Positive for the gold market, the robust activity in the U.S. service sector continues to drive inflation pressures. The report said that the Prices Index rose to 77.5%, up from August’s reading of 75.4%.

Anthony Nieves, chair of the ISM Services Business Survey Committee, said that 17 service sector industries grew last month; however he added that although the service sector continues to expand, the economy continues to face headwinds.

“Ongoing challenges with labor resources, logistics, and materials are affecting the continuity of supply,” he said.

By Neils Christensen

For Kitco News

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