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(Kitco News) -The gold market is trying to hold critical support levels but is struggling even as activity in the U.S. service sector continues to slow, according to the latest data from the Institute for Supply Management (ISM).
Thursday, the ISM said its Services Purchasing Managers Index fell to a reading of 52.7% last month, down from June's reading of 53.9%. The data also missed consensus estimates as economists were expecting a small drop to 53.1%.
"There has been a slight pullback in the rate of growth for the services sector. This is due mostly to the decrease in the rate of growth for business activity, new orders, and employment, as well as ongoing faster delivery times. The majority of respondents are cautiously optimistic about business conditions and the overall economy," said Anthony Nieves, chair of the ISM Services Business Survey Committee, in the report.
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.
The disappointing economic data is not having much impact on gold as safe-haven demand continues to benefit the U.S. dollar. December gold prices last traded at $1,971 an ounce, down 0.20% on the day.
Analysts have said that $1,970 represents an important support level, and if it breaks, prices could see a drop back to $1,900 an ounce.
Andrew Hunter, deputy chief U.S. economist at Capital Economics, said that despite resilient economic growth in the first half of 2023, the latest data shows there is still a lot of uncertainty ahead.
"The fall in the ISM services index in July illustrates that even though the risks of a recession may be easing, that doesn't mean the economy is set to enjoy a strong performance over the second half of the year," he said. "Overall, the survey evidence remains consistent with fairly muted economic growth and continued sharp falls in inflation, suggesting there is little need for the Fed to raise its policy rate any further."
