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Gold prices remains under pressure, ignores jump in U.S. ISM Service-Sector PMI to 56.7

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Correction: A previous article quoted the wrong data for July ISM Service PMI. The following article has the correction numbers.

(Kitco News) - The gold market continues to see solid technical selling pressure but has largely ignored stronger than expected activity in the U.S. service sector, according to the latest report from the Institute for Supply Management (ISM).

Wednesday, the ISM said that its service-sector index showed a reading of 56.7% for July, up from June’s reading of 55.3%. The data beat expectations, as consensus forecasts called for a drop to 53.5%.

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.

“Growth continues — at a faster rate — for the services sector, which has expanded for all but two of the last 150 months. The slight increase in services sector growth was due to an increase in business activity and new orders,” said Anthony Nieves, Chair of theism Services Business Survey Committee.

The gold market is not seeing much movement in reaction to the latest economic data. December gold futures last traded at $1,776.80 an ounce, down 0.72% on the day.

Looking at the components of the report, The Business Activity Index jumped to 59.9%, up from June’s reading of 56%. The New Orders Index rose to 59.9%, compared to the June reading of 55.6 percent.

However, the report shows slowing momentum in the labor market. The Employment Index remained in contraction territory at 49.1%, up from June’s reading of 47.4%.

Although activity in the service sector remains strong, inflation pressure appear to be dropping. The report said that the Prices Index dropped to 72.3% down from the previous reading of 80.1%.

Michael Pearce, senior U.S. economist at Capital Economics said that the latest service-sector data will help to relieve some of the recession fears.

“In stark contrast to the weaker S&P Global services survey for the US, the July ISM reports suggest that the overall economy is still holding up well. With borrowing costs down from their June peak, and falling gasoline prices likely to feed through to rising real disposable incomes, the immediate outlook for services is looking a little brighter,” he said.

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