(Kitco News) - The gold market has been unable to hold its gains at session highs, even as prices remain solidly above $4,200 an ounce, after the Philadelphia Federal Reserve reported a sharp contraction in its regional manufacturing survey.
The report is expected to add to growing uncertainty surrounding the health of the U.S. economy; however, the outlook remains far from definitive.
The regional central bank said its manufacturing business outlook for October dropped to -12.8, following a strong recovery in September to 23.2. The data were far weaker than expected, as economists had been looking for a reading of 8.6 this month.
The report shows that activity in the region has fallen to its lowest level since April.
“The survey’s index for current general activity fell significantly and turned negative, more than offsetting last month’s increase,” the report said. “Twenty-five percent of firms reported decreases in general activity this month (up from 17 percent last month), while 12 percent reported increases (down from 40 percent); 58 percent reported no change (up from 43 percent).”
The gold market continues to experience modest volatility as it maintains significant bullish momentum. Economic data have had little impact on price action; however, analysts note that disappointing data will continue to support the precious metal’s safe-haven appeal.
Spot gold last traded at $4,230.80 an ounce, up 0.56% on the day.
Although the headline number was worse than expected, the components of the report were mixed. The New Orders Index rose to 18.2, up from September’s reading of 12.4. Meanwhile, the Shipments Index dropped sharply to 6, down from 26.1 the previous month.
The labor market also lost some momentum, with the Number of Employees Index falling to 4.6, down from September’s reading of 5.6.
Although manufacturing activity in the region has slowed, inflation pressures remain elevated. The report said the Prices Paid Index rose to 49.2, up from September’s reading of 46.8.
While the Philly Fed survey highlights growing downside risks for the economy, the overall picture remains murky. On Wednesday, the New York Federal Reserve said its Empire State Manufacturing Survey rose to 10.7 in October, a sharp improvement from September’s negative reading of 8.7.
