Gold retreats to near five-year lows, as dollar surges amid ISM data

Investing.com — Gold fell mildly on Wednesday retreating back to near five and a half year lows, as strong non-manufacturing data from the Institute of Management pushed the dollar to its highest level in three and a half months.

On the Comex division of the New York Mercantile Exchange, gold for December delivery traded in a tight range between $1,082.10 and $1,091.30 an ounce before settling at $1,085.49, down 5.30 or 0.49% on the session.

Gold had stabilized in recent sessions after dipping below $1,075 an ounce late last month to touch down to its lowest level since 2010. Last Friday, for instance, it moved back above $1,100 an ounce after gaining more than $7 on the session. Since then, however, it has closed lower on three of the last four trading days. Over the last month, gold has only closed in the green in six of 27 sessions while losing more than 7.25% in value.

The precipitous fall included a 10-day rout in mid-July, which marked gold longest losing streak in nearly two decades. Investors have abandoned their positions in gold, as it loses its appeal as a safe haven asset following the resolution of comprehensive Greek Bailout and Iranian Nuclear deals. A historic collapse in Chinese equities and signals from the Federal Reserve on the timing of an imminent rate hike has also weighed on the precious metal.

Gold likely gained support at $1,073.70, the low from July 24 and was met with resistance at $1,103 the high from July 31.

The dollar surged forward on Wednesday morning, after the ISM's Non-Manufacturing Index soared to 60.3 in July, its highest reading in a decade. The reading gained more than seven points from its level in June, as both new orders and backlog orders rose sharply on the month. Analysts expected a consensus range for the July reading to come in between a level of 55.0 and 57.5.

The , which measures the strength of the greenback against a basket of six other major currencies, jumped to an intraday high of 98.33 shortly after the release – its highest level since April 23. In U.S. afternoon trading, the index stood at 98.14, up 0.10% on the session.

Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates. The dollar pared earlier losses that resulted from a downgraded assessment of the current conditions in the U.S. labor market. In its monthly national employment report for July, fellows from the ADP Research Institute estimate that private payrolls in the U.S. rose by 185,000 in July, below forecasts of a 210,000 gain and down from an increase of 237,000 a month earlier.

It comes two days before the U.S. Department of Labor releases the official government data from its national employment situation report for the month of July. On Wednesday, Federal Reserve governor Jerome Powell said he will be taking a data-dependent approach to the timing of a potential rate hike, placing particular emphasis on the strength of the labor market.

Gold, which is not attached to dividends or interest rates, struggles to compete with high-yield bearing assets in periods of rising rates.

Silver for September delivery rose 0.008 or 0.05% to 14.565 an ounce.

for September delivery fell 0.015 or 0.64% to 2.347 a pound.