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Gold prices at daily lows despite disappointing U.S. service sector data

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(Kitco News) Gold prices saw more losses Wednesday morning even though momentum in the service sector slowed its expansion in November, according to the latest data from the Institute of Supply Management (ISM).

The Non-Manufacturing Purchasing Managers Index retreated to a reading of 53.9% in November, down from October’s 54.7%. The 0.8 percentage-point decline surprised the markets, with consensus expectations calling for the index to come in at 54.5%.

Readings above 50 are seen as a sign of economic growth – the farther an indicator is above or below 50, the greater or smaller the rate of change.

“This represents continued growth in the non-manufacturing sector, at a slightly slower rate,” the report said.

The details of the ISM Non-Manufacturing report revealed that the new orders sub-index rose to 57.1% from October’s 55.6%.

Looking at other components, business activity sub-index decreased to 51.6% from 57% registered in October. The employment index rose to 55.5% from October’s reading of 53.7%. Economists keep a close eye on the latter number as a gauge into the employment situation in the country.

Inflation pressures rose for the 30th consecutive month, with the price index coming in at 58.5% in November.

In an immediate reaction to the data, gold prices dropped to new daily lows with February Comex gold futures last trading at $1,477.90, down 0.44% on the day.

Prior to the release, gold prices were already selling off amid U.S.-China trade optimism.

The monthly decline in the ISM non-manufacturing index certainly suggests that the risks to the U.S. economic outlook are tilted to the downside, but one figure will not be enough to convince the Federal Reserve to go back to cutting rates, said Capital Economics senior U.S. economist Andrew Hunter.

“The latest batch of ISM surveys are clearly a disappointment, but on their own, they won’t be enough to trigger a ‘material reassessment’ of the Fed’s outlook for the economy. The upshot is that we still think further policy loosening is unlikely,” wrote Hunter.

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