AGE Daily Gold Update

AGE Daily Gold Update presents a recap on today's action in the precious metals markets. View archives.

6/3/2021: Gold falls after ISM, ADP surveys

Source: Bill Musgrave, American Gold Exchange

Austin — Gold fell 1.9% to close under $1,874 as strong ISM and employment data lifted yields and the dollar, undercutting demand for alternative stores of value. It was the metal's lowest finish in two weeks.

The US services sector expanded strongly in May as vaccinations allowed Americans to get out and spend on dining, travel, and recreation. The ISM services index rose to a record-high 64%, where anything over 50% signals expansion. The services sector accounts for close to 70% of GDP.

Fueled by hot growth in services, the private sector added 978,000 new jobs in May, according to ADP, far more than forecast and well above April's already-strong revised reading of 654,000. However, the ADP survey is often a poor barometer of the more authoritative federal nonfarm payrolls report, due tomorrow. In April, the NFP tally fell short of ADP by nearly 500,000 jobs.

In another encouraging sign for the labor market, first-time filings for jobless benefits fell under 400,000 last week for the first time since the pandemic began.

The dollar surged 0.7% against major rivals as traders speculated that the Fed may begin to tighten monetary policy ahead of schedule, despite near-constant declarations to the contrary. A rising dollar makes gold and other commodities more expensive in other currencies, reducing overseas demand.

Treasury yields also rose after the strong data, with the benchmark 10-year yield back over 1.6%. Higher yields are a headwind for gold because they increase the opportunity cost for holding it instead of bonds as a safe-haven asset.

The other precious metals were also lower. Silver dropped 2.6% while platinum and palladium slid 2.5% and 1.5%, respectively.

At the Comex close: August gold fell $36.60 to $1,873.30; July silver lost 73 cents to $27.48; July platinum shed $30.30 to $1,162.50; and September palladium dropped $42 to $2,826.60 an ounce.