The manufacturing index dropped significantly from August’s reading of 20.6, signaling a cooling trend in the regional industrial sector. Despite this contraction, Richard Deitz, Economic Research Advisor at the New York Fed, noted that manufacturing activity continues to advance modestly, supported by solid employment growth even as pricing pressures intensify.

Markets are largely ignoring the data, focusing instead on the Federal Reserve’s upcoming policy decision. Investors currently assign a 90% probability to a 25-basis-point rate hike, a prospect that has bolstered the U.S. dollar and pushed 10-year bond yields above 5% for the first time since 2008. Analysts suggest the current manufacturing weakness remains insufficient to deter the Fed from its hawkish trajectory, leaving gold vulnerable to ongoing upward pressure on interest rates.