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Gold market can't shake selling pressure despite weak ISM service-sector data

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(Kitco News) - The gold market remains under pressure, trading near its session lows as the price sees little reaction to better-than-expected momentum in the U.S. service, according to the latest data from the Institute for Supply Management (ISM).

Wednesday, the ISM said its nonmanufacturing index showed a reading of 55.3% for February, down from January's reading of 58.7%. The data were weaker than expected, as consensus forecasts were calling for an unchanged reading.

Readings above 50% in such diffusion indexes are seen as a sign of economic growth and vice-versa. The farther an indicator is above or below 50%, the greater or smaller the rate of change.

The gold market can't shake the renewed selling pressure despite weaker than expected U.S. economic data. April 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-based weakness. The report said that its Business Activity index dropped to 55.5%, down from January's reading of 59.9%.

The labor market also lost momentum, with the Employment Index falling to 52.7%, down from January's reading of 55.2. According to some economists, the employment data does not bode well for Friday's nonfarm payrolls report as the service sector is a significant contributor to employment.

Positive for the gold market, even if investors are ignoring the data, inflation pressures are on the rise. The report said the Price Index rose to 71.8%, up from January's reading of 64.2%.

Katherine Judge, senior economist at CIBC, said that the drop in service-sector sentiment comes as a bit of a surprise as States started to ease COVID-19 restrictions.

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