2023.06.0518:10:00UTC+00Gold Futures Erase Early Losses, Settle Modestly Higher

Gold futures recovered from early losses and settled slightly higher on Monday as the dollar retreated in the New York session after having climbed higher earlier.

Gold prices rallied as data showing drop in U.S. service sector activity weighed on dollar and pushed up the demand for the safe-haven yellow metal.

The dollar index, which surged to 104.40 dropped to 103.93 before edging up to 104.00, slightly down from the previous close.

Gold futures for August rallied from a low of $1,953.80 an ounce to settle at $1,974.30 an ounce, gaining $4.70 or 0.2% for the session.

Silver futures for July ended down $0.112 at $23.635 an ounce, while Copper futures for July settled at $3.7680 per pound, down $0.0405 from the previous close.

Edward Moya, Senior Market Analyst at OANDA says the ISM services report is raising hopes that the Fed might not have to deliver anymore rate hikes if we see further weakness next month. "Gold is holding up nicely, but unless we see a major pullback in the stock market, it might struggle to make an attempt above the $2000 level," he adds.

The report from the Institute for Supply Management showed service sector activity in the U.S. saw only modest growth in the month of May, with the index of activity in the sector falling by more than expected.

The ISM said its services PMI fell to 50.3 in May from 51.9 in April, although a reading above 50 still indicates growth in the sector. Economists had expected the index to edge down to 51.5.

A separate report released by the Commerce Department showed new orders for U.S. manufactured goods increased by slightly less than expected in the month of April.