The U.S. Institute of Supply Management reported a day earlier that the ISM non-manufacturing Purchasing Managers’ Index for August came in at 51.4, the lowest level since early 2010.
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Gold for December delivery on the Comex division of the New York Mercantile Exchange traded in a narrow range of gains and losses around the $1,349.55 a troy ounce level. The metal earlier touched a high of $1,352.65, its best since August 19.
Declining U.S. yields undermined the dollar against other currencies and precious metals.The dollar, which had slumped 1.38 percent on the yen on Tuesday, shed another 0.6 percent to 101.36 yen.
“Gold looks to be moving into the next rally stage should it trade materially above $1,350”, MKS PAMP Group trader James Gardiner said. “We see more potential upside from here with September now looking highly unlikely for rates to move higher”.
The dollar tumbled and Asian stocks rose to one-year highs on Wednesday after surprisingly weak US services sector activity dashed already slim chances of an interest rate hike by the Federal Reserve as early as this month.
“The fact that recent weakness in the price has not translated into a wave of selling – not yet at least – suggests that the underlying investor sentiment towards gold remains stable”, Societe Generale analysts said in a note. But absence of a rate hike in September may largely be priced into gold.
“This may limit gains just as ongoing geopolitical tensions, public discontent, and threats to free trade and globalization will likely support the bullion markets”.
Gold prices soared in 2016 to touch a high of $US1,374.91 an ounce early in July after Britain’s shock vote to leave the European Union created a heightened sense of uncertainty.
The euro EUR= maintained Tuesday’s 0.96 percent rise against the dollar, the biggest daily gain in three months on Tuesday and last stood at $1.1260.
MSCI’s broadest index of Asia-Pacific shares outside Japan.MIAPJ0000PUS rose 0.4 percent, extending gains of 2.7 percent over the last two days, to claim a level last seen in July previous year.
The price of the 1.5 percent security due in August 2026 was 99 22/32.
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The yield on the two-year Treasury note, the coupon maturity most sensitive to Fed policy expectations, on Tuesday fell 6 basis points, or 0.06 percentage points, to 0.73 percent. Palladium was mostly unchanged at $694.50 after touching an over two-week high of $708.40.
