(Kitco News) – The gold market is still under pressure and trading is close to its session as the price sees little reaction to better-than-expected momentum in the US service, according to the latest data from the Institute for Supply Management (ISM).
On Wednesday, the ISM said its non-manufacturing index showed a reading of 55.3% for February, a decrease from the January reading of 58.7%. The data were weaker than expected, as consensus forecasts required an unchanged reading.
Readings above 50% in such diffusion indices are seen as a sign of economic growth and vice versa. The longer an indicator is above or below 50%, the greater or less the speed changes.
The gold market cannot shake the renewed sales pressure despite weaker-than-expected US economic data. Gold futures last traded at $ 1,709.30 an ounce, down 1.4% on the day.
Not only did the headline data disappoint expectations, but components of the report showed broad weakness. The report said its business activity index fell to 55.5%, down from 59.9% in January.
The labor market also lost momentum, with the employment index falling to 52.7%, compared with January 55.2. According to some economists, the employment data are not good for Friday’s non-farm wage report, as the service sector is a significant contributor to employment.
Positive for the gold market, even if investors ignore the data, inflationary pressures increase. The report said the price index rose to 71.8%, compared to the January reading of 64.2%.
Katherine Judge, senior economist at CIBC, said the decline in sentiment in the service sector came as a surprise when states began easing COVID-19 restrictions.
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