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Gold Prices Fall as the Service Sector Expands; Silver Prices Also Slip

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Gold prices fell on Monday as investors remained wary of taking new positions on the metal after the Institute of Supply Management’s (ISM) PMI index showed more-than-expected expansion in non-manufacturing activities in July, raising speculation that the Federal Reserve might eventually start tapering of the quantitative easing in the near-future. Silver prices also fell in trading on Monday.

At last check, gold futures for December delivery fell 0.73% to $1,300.90 an ounce while spot gold edged down 0.67% to $1,302.66 an ounce.

Earlier on Friday, an unexpectedly weak non-farm payrolls data arrested the downward trend in the metal prices even as the U.S. dollar eased.

Still, many strategists are of the view that the Fed will look at some more economic data releases and not just base its decision on the non-farm payrolls data.

With the non-manufacturing PMI Index jumping to 56 in July from 52.2 in June, the probability is high that the bank could start scaling down its economic stimulating measures sooner-than-later.

“The service sector accounts for nearly 80 percent of U.S. employment and a pick-up here may be interpreted as bolstering the probability of a reduction in the size of the Federal Reserve‘s monthly asset purchases at September’s FOMC meeting,” said Ilya Spivak, currency strategist at DailyFX in New York, according to Reuters.

The Fed’s current round of gold-supportive quantitative easing is explicitly tied to an improvement in the U.S. labor market.

As gold does not provide any interest or dividends, a tighter monetary policy will sway investors towards fixed income markets, weighing on the asset prices. Besides, a stronger dollar (in this backdrop) also tends to hurt the demand for dollar-priced commodities.

Silver futures were last down 1.06% to $19.70

In late trading, the iShares Silver Trust (ETF) (NYSE: SLV) was down 0.31%, and the ProShares Ultra Silver (ETF) (NYSE: AGQ) was down 0.52%.








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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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