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Gold softens on improving U.S. service-sector data

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Shutterstock photo - Gold prices edged lower in afternoon trading on Monday after better-than-expected U.S. service-sector data released earlier kept expectations alive the economy continues to improve and will soon no longer need monetary support from the Federal Reserve.

Fed stimulus measures such a monthly USD85 billion bond-buying program tend to weaken the dollar by pushing down long-term interest rates, making gold an attractive hedge.

Gold and the dollar tend to trade inversely with one another, and talk of an end to stimulus tends to strengthen the dollar and soften gold prices.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,300.25 during U.S. afternoon hours, down 0.78%.

The December contract settled down 0.05% at USD1,310.50 a troy ounce on Friday.

Gold futures were likely to find support at USD1,282.65 a troy ounce, Friday's low, and resistance at USD1,339.15, Wednesday's high.

The Institute for Supply Management reported earlier that its non-manufacturing purchasing managers' index rose to 56.0 in July from a three year low of 52.2 in June.

Analysts had expected the index to inch up to 53.0 last month.

An increase in new orders drove gains, with the new orders component of the index rising to 57.7 from 50.8 in June.

A reading over 50 signifies expansion.

The numbers renewed expectations for the Federal Reserve to begin tapering its stimulus programs later this year, which weakened gold, though uncertainty curbed losses, especially in wake of a lackluster U.S. July jobs report released late last week.

The Bureau of Labor Statistics reported on Friday that the U.S. economy added 162,000 jobs in July, missing expectations for an increase of around 189,000.

The report also revealed that the U.S. unemployment rate ticked down to 7.4% in July, from 7.6% the previous month. Analysts had expected the unemployment rate to slip to 7.5% last month.

While markets are still betting the U.S. central bank will begin tapering its USD85 billion monthly bond-buying program in the coming months, the data prompted many to take up positions on the likelihood that such a move may come in December as opposed to September, which gave gold some support.

Elsewhere on the Comex, silver for September delivery was down 1.10% at USD19.693 a troy ounce, while copper for September delivery was down 0.40% and trading at USD3.160 a pound. - offers an extensive set of professional tools for the financial markets.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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