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Gold prices surge to session highs after New York Fed survey rises to 1.9 in September

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(Kitco News) - Gold prices rallied to new session highs after the latest data from the New York Federal Reserve showed stabilization of activity within its region's manufacturing sector.

The regional central bank said Friday that its Empire State manufacturing survey's general business conditions index rose to 1.9 in September, up nearly 21 points from August's reading of -19. The data was stronger than expected, as consensus forecasts were looking for the headline index to remain in contractionary territory with a smaller improvement to -10 after August saw the survey's first negative reading since May.

The gold market saw a delayed rally following the better-than-expected manufacturing data, and prices are now setting new session highs. Spot gold last traded at $1,926.54 an ounce, up 0.80% on the day.

The report highlighted broad-based improvement throughout the sector. The New Orders Index rose 25 points to 5.1, up from August's reading of -19.9. The Shipments Index also rose 25 points to 12.4, up from the previous month’s -12.3 level.

The report noted weakness in the labor market, with the Number of Employees Index declining slightly to -2.7, down from August's reading of -1.4.

The report also noted persistently elevated inflation pressures, which have been negative for gold as it forces the Federal Reserve to maintain its aggressive monetary policies. The report said its Prices Paid Index held steady at 25.8, virtually unchanged from August’s level of 25.2.

The Future Business Conditions index rose six points to 26.3, its highest level in more than a year, indicating that firms have become more optimistic about their future conditions.

“New orders and shipments are expected to increase significantly in the months ahead, and employment is expected to grow,” the report said.

Parker Ross, Global Chief Economist at Arch Capital Group, said he sees reasons for optimism about the U.S. manufacturing sector in today’s report.

“I don't typically comment on the Fed surveys given their extreme month-to-month volatility, but the big beat in this morning's Empire State Manufacturing Survey caught my eye (1.9 vs -10 cons and -19 prior),” he said. “Most notably because of 1) a surge in current and expected new orders and 2) a big improvement in "prices received" while "prices paid" were muted.”

“Taken together, this suggests positive developments in current and expected conditions for production and profits,” Ross said.

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