(Kitco News) - The gold market is unable to attract any new bullish momentum, even as the Philadelphia Federal Reserve reports further volatility in its regional manufacturing sector, with activity once again falling into contraction territory.
The regional central bank said its manufacturing business outlook for August was -0.3, down sharply after rising to 15.9 in July. The data was weaker than expected, as economists were looking for a reading of 6.8.
“The current general activity index fell to a near-zero reading, the new orders index dipped into negative territory, and the shipments index also declined but remained positive. The employment index continued to suggest overall increases. Both price indexes remained elevated,” the report said.
The gold market is not paying much attention to economic data as traders wait patiently to hear from Federal Reserve Chair Jerome Powell on Friday at the U.S. central bank's annual retreat in Jackson Hole, Wyoming.
According to sme economists, disappointing economic data continues to support expectations that the Federal Reserve will renew its easing cycle next month, which should support higher gold prices. Until then, the precious metal remains stuck near critical near-term support. Spot gold last traded at $3,340.50 an ounce, down 0.17% on the day.
Looking at components of the report, the new orders index dropped to -1.9, down from July’s reading of 18.4. At the same time, the shipments index fell to 4.5, down from the previous reading of 23.7.
The report also noted weakness in the labor market, with the employment index falling to 5.9 from 10.3.
Along with slowing activity, the report also highlights a potential stagflationary environment as prices remain elevated. The prices paid index increased 8 points to 66.8, its highest reading since May 2022.
“Most firms (64 percent) reported no change in prices received, 36 percent of the firms reported increases, and none reported decreases,” the report said.
Inflation pressure are expected to only increase, according to the survey’s “special question.”
“Regarding their own prices over the next year, the firms’ median forecast was for an expected increase of 4.1%, up from 3.8% when this question was last asked in May. The firms reported a median increase of 3.5% in their own prices over the past year, up from 3.0% last quarter,” the report said. “The firms’ median forecast for the rate of inflation for U.S. consumers over the next year edged down from 3.8% to 3.6%.”
