(Kitco News) - Inflation fears continue to spook gold investors, and solid manufacturing activity reported by the New York Federal Reserve could put further pressure on gold.
The regional central bank reported on Wednesday that its Empire State Manufacturing Survey rose more than expected, jumping to 19.5 in May, compared to April’s reading of 11.
The data significantly beat consensus estimates, as economists had forecast a decline to 7.3.
“New York State manufacturing activity grew at its fastest pace in over four years in May. New orders and shipments rose strongly, and employment continued to increase. However, the pace of price increases surged, while delivery times and supply availability worsened,” said Richard Deitz, Economic Research Advisor at the New York Fed.
The gold market is not seeing a significant reaction to the better-than-expected manufacturing data; however, prices remain near session lows and below near-term support levels. Spot gold was last trading at $4,546.60 an ounce, down more than 2% on the day.
Some analysts have said that gold could continue to struggle, as the latest report supports growing expectations that the Federal Reserve will be forced to raise interest rates by the end of the year.
The components of the report showed solid growth. The New Orders Index rose to 22.7, up from April’s reading of 19.3. At the same time, the Shipments Index remained relatively steady at 18.9, down from 20.2 in April.
The report also showed a relatively stable-to-cooling labor market. The Number of Employees Index fell to 8.3, compared to the previous reading of 9.8.
While the headline number was significantly stronger than expected, the growth also came with rising inflation. The Prices Paid Index jumped to 62.6, up from 51 in April.
Although inflation continues to ramp up, the increased activity helps alleviate stagflation fears.
