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(Kitco News) – Gold prices are just off session highs, seeing technical buying momentum even as the data continues to pull down economic activity in line with expectations.
The Institute for Supply Management (ISM) on Thursday said its non-manufacturing index posted a 56.9% August reading, down from the July reading of 58.1%. The data was relatively in line with expectations, as the consensus forecast called for a reading of 57%.
Readings above 50% in these diffusion indices are considered a sign of economic growth and vice versa. The more an indicator is above or below 50%, the greater or smaller the rate of change.
Ahead of the report’s release, the gold market is seeing renewed buying momentum with prices hitting session highs. The latest economic data had little impact on the market as an initial reaction. December gold futures last traded at $ 1,952.30 an ounce, up 0.39% on the day.
Looking at the report’s components, the Business Activity Index fell to 62.4%, down from the previous reading of 67.2%. Meanwhile, new orders fell sharply to 56.8%, down from the July reading of 67.7%.
The service sector labor market also remains under pressure. The report says the employment index rose to 47.9% from 42.1% in July.
Adam Button, chief currency strategist at Forexlive.com, said this was the sixth consecutive reading for the employment index to fall below 50%.
“This is not a good sign for Friday’s non-farm payroll report,” he said.
While the headline data was better than expected, Katherine Judge, a senior economist at CIBC, said this added to the list of data points pointing to slower growth.
“The service side of the US economy appears to have slipped down a gear in August according to the ISM index,” she said. “Given the still high levels of the virus, the drop observed in mobility indicators, the drop in consumer confidence and the uncertainty surrounding further support from government revenues, it appears that the US recovery is now more flexible. .
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