Spot gold trades at $3,668/oz after Philly Fed survey rises to 23.2 in September

NEW YORK (September 18) The gold market is trading near session highs on Thursday morning after the Philadelphia Federal Reserve's manufacturing sector survey rose deeper into expansionary territory this month.

The regional central bank said its manufacturing business outlook for September came in at 23.2 after a reading of -0.3 in August. The data was far better than expected, as economists were looking for a reading of 2.3 this month. September’s reading was the highest since January.

“Manufacturing activity in the region expanded overall, according to the firms responding to the September Manufacturing Business Outlook Survey,” the report said. “The survey’s indicators for current general activity, new orders, and shipments all rose, with the former two returning to positive territory. The employment index remained mostly unchanged and continued to reflect overall increases in employment. Both price indexes moderated but remain elevated. The survey’s future indicators suggest widespread expectations for growth over the next six months.”

Gold dipped in the minutes following the better-than-expected manufacturing data release, but prices quickly returned to trade near the top of their daily range. Spot gold last traded at $3,668.81 per ounce for a gain of 0.24% on the day.

The key components of the index improved in September. “Almost 40 percent of the firms reported increases in general activity this month (up from 30 percent last month), while 17 percent reported decreases (down from 30 percent); 43 percent reported no change (up from 36 percent),” the Philly Fed stated. “The new orders index rose 14 points to 12.4 this month, and the shipments index rose 22 points to 26.1.”

The employment picture held steady in the region. “On balance, the firms continued to report overall increases in employment this month, and the employment index was little changed at 5.6,” the report said. “Almost 16 percent of the firms reported increases, while 10 percent reported decreases; 74 percent of the firms reported no change in employment levels. The average workweek index rose 10 points to 14.9.”

The Philly Fed report also showed prices moderated somewhat, but continued to rise on balance.

“The prices paid index fell 20 points to 46.8, down notably from a multiyear high last month,” the report noted. “Nearly 49 percent of the firms reported increases in input prices, while 2 percent reported decreases; 48 percent of the firms reported no change. The current prices received index fell 17 points to 18.8. Almost 20 percent of the firms reported increases in prices received for their own goods, 1 percent reported decreases, and 78 percent reported no change.”

The survey’s broad indicators for future activity indicated most firms are expecting growth. 

“The diffusion index for future general activity rose 7 points to 31.5 in September [...], its highest reading since May,” the report said. “The share of firms expecting increases in activity over the next six months (52 percent) exceeded the share expecting decreases (21 percent); 27 percent expect no change. The future new orders index edged up 3 points to 42.4, while the shipments index fell 9 points to 31.0. Expectations for employment were more widespread as the future employment index rose from 12.7 to 23.7. The future capital expenditures index fell 26 points to 12.5.”

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