Another Decline Driven By Higher US Treasury Yields

Gold is 0.2% higher in the Asia-Pac session, after closing -0.5% at $1917.25 on Wednesday. Bullion was pressured by an increase in front end US Treasury yields rather than USD strength with the latter seeing relatively modest gains considering the surprise strength in ISM Services.

• The ISM Services Index printed more robustly than expected (54.5 vs. 52.5 est. & 52.7 prior), with Prices Paid (58.9 vs. 56.8 prior). Reacceleration to the highest reading since February added further evidence that the US economy has been resilient through Q3.
• US Treasuries finished 2-7bp cheaper, with the curve flatter. Implied Fed funds repriced for a slightly better than 50-50 chance for a 25bp tightening in November, though eased back to 42% by the close. The market attached a 7% chance of a hike on 20 September.
• While little changed on Wednesday, the USD Index looks to have resumed the primary uptrend off the mid-July low, potentially exerting sustained downward pressure on precious metals, according to MNI's technicals team.