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The gold market is holding near session highs but is seeing little reaction as momentum in the service sector falls relatively in line with expectations.
Friday, the Institute for Supply Management (ISM) said its non-manufacturing index showed a reading of 61.7% for August, down from July's reading of 64.1%. According to consensus estimates, economists were forecasting a reading around 61.9%.
The gold market is holding on to solid gains just below critical resistance levels following the latest economic data. December gold futures last traded at $1,829.2 an ounce, up nearly 1% on the day.
Gold prices surged earlier in the session after the U.S. Labor Department said that 235,000 jobs were created in August, significantly missing expectations.
Katherine Judge, senior economist at CIBC, said that the ISM data and labor market numbers highlight slowing economic growth in the U.S. as the COVID-19 Delta variant sweeps through the nation. However, she added that the slowdown could be temporary.
"Combined with the disappointing jobs report for August, this report also favors a slower pace to H2 2021 GDP growth than our previous forecast taking into account the impact of the Delta variant spread. However, this will be only a temporary detour, and we look for a reacceleration in growth next spring as the Delta wave will then be behind us," she said.
Looking at the components of the report, the Business Activities Index dropped to a reading of 60.7%, down from July's reading of 67. At the same time, the New Orders Index fell to 63.2%, down from the previous level of 63.7%.
Momentum in the U.S. labor market remained relatively unchanged, with the Employment data falling to 53.7%, down from July's reading of 53.8%. However, the index has less importance coming after the release of the government's nonfarm payrolls.
Inflation pressures also dropped slightly from their elevated levels. The Prices Index fell to 75.4%, down from July's reading at 82.3%.
By Neils Christensen
For Kitco News
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