Gold Dips On Strong Economic Data, Sluggish Physical Demand

Gold edged lower Tuesday, extending losses set in the previous session as better-than-expected U.S. service sector data flagged concerns for an eventual slowing of the Federal Reserve’s bullion-friendly $85 billion monthly asset purchases.

- As of 03:01 ET, gold dropped 0.95 percent or 12.38 points to $ 1,290.95

- Silver for immediate delivery fell 0.56 percent or 0.11 points to trade at $ 19.65

The metal accelerated losses after data showed growth in the U.S. services sector rebounded from a three-year low, with the Institute for Supply Management’s survey of Purchasing Managers’ Index (PMI) rising to 56.0 from 52.2 in June, topping analysts’ estimated at 53.1.

The positive services data has fueled concerns of an early Fed-stimulus exit as the Fed has said it will start tapering stimulus this year should the economy continue to show improvement, following ast week`s strong U.S. factory activities and a mixed U.S. nonfarm payrolls report which pushed the gold prices lower.

Data from the U.S. Labor Department showed unemployment rate softened to 7.4 percent, the lowest since December 2008, from 7.6 percent in Jun. Non-farm payrolls grew by 162,000 workers last month, against forecasts beforehand of 185,000.

As of (10:00 GMT+3), the dollar index traded around 81.97 after opening at 83.48; USDIX hit a high of 83.48 and a low of 81.80.

Encouraging services Purchasing Managers` indexes (PMI) from the Euro area and UK released on Monday also weighed on bullion`s appeal as an investment hedge.

UK PMI on services climbed above 60.0 for the first time in seven years in July, further supporting expanded Gross Domestic Production (GDP) 0.6 percent growth, while Eurozone services PMI expanded for the first time in 18 months in July.

- Spot platinum declined 0.66 percent to $ 1,441.60

- Spot palladium lost 1.07 percent to $ 727.55

The lack of investor enthusiasm for the precious metal also weighed on prices Tuesday, as reports showed demand from China, the world’s second largest gold consumer, has fallen off in recent weeks.

Meanwhile, holdings in SPDR Gold Trust, the world`s largest gold-backed exchange-traded fund, dropped 0.2 percent to 917.14 tons on Monday.