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(Kitco News) -
The gold market saw renewed selling pressure after the latest data from the Institute for Supply Management (ISM) showed activity in the U.S. service sector strengthened far more than expected in June.
On Thursday, the ISM said its Services Purchasing Managers Index rose to 53.9% last month, well up from May's reading of 50.3% and far exceeding the consensus estimates of economists, who were expecting a one-point increase to 51.3%.
Readings above 50% in such diffusion indexes signify economic growth and vice-versa. The farther an indicator is above or below 50%, the greater or smaller the rate of change.
Activity in the service sector expanded in June for the sixth consecutive month, and the sector has grown in 36 of the last 37 months, with the lone contraction seen in December of last year.
The gold market had already seen a sharp selloff following Thursday’s stronger-than-expected jobs data, and the downward pressure continued after the Services PMI release.
Spot gold had managed to climb back to $1949.19 20 minutes before the 10 am EDT release after falling to session lows of $1902.70 at 8:52 am EDT. But gold resumed its downward trajectory after the strong data on the U.S. services sector, trading at $1904.37 at the time of writing.
“There has been an uptick in the rate of growth for the services sector,” said Anthony Nieves, chair of the ISM Services Business Survey Committee. “This is due mostly to the increase in business activity, new orders and employment. Increased capacity, backlog reduction and continued improvements in logistics have impacted delivery times (resulting in a decrease in the Supplier Deliveries Index).”
Looking at the components of the report, The Business Activity Index rose sharply to 59.2%, up from May's reading of 51.5%, while the New Orders Index rose to 55.5%, up from the previous reading of 52.9%.
The labor market also saw renewed strength in June, with the Employment Index rising back into expansionary territory with a reading of 53.1%, up from May’s reading of 49.2%.
The report also noted falling inflation pressures, as the Prices Index dropped to 54.1%, down from May's reading of 56.2%.
“The majority of respondents indicate that business conditions remain stable,” Nieves said. “However, they are cautious relative to inflation and the future economic outlook.”
