A Month Ago a Booming Economy Lifted Gold. Today It Knocked Gold Down 1.6%.

58.4. That’s S&P Global’s flash composite PMI for September, up from 56.0 in August. Services came in at 58.7 against 56.0 expected. Manufacturing hit 57.0 against 53.6 expected. S&P Global’s Chris Williamson says output is growing at the fastest rate in over five years.

Gold’s response: down 1.6%, to around $4,285 by mid-morning in New York, according to FXStreet.

Here’s why that’s interesting. A month ago, this site wrote about the August PMI: 56.0, the best business activity in four years, and gold rallied anyway. Same kind of headline this time. Opposite reaction. Economic data didn’t stop mattering. The market just read a different line in the report.

The Line That Moved Gold

It wasn’t the growth. It was the prices.

Williamson says firms’ input costs “jumped in September at the steepest rate for four years,” with fuel and transport leading. Companies are also “developing more pricing power, and hence is a worry for the inflation outlook.” Translation: businesses are paying more, and they can now pass it on to you.

That’s the sentence a Fed that’s already hiking was waiting for. Last week it raised rates a quarter point, to 3.75%–4.00%. On Tuesday, Richmond Fed President Tom Barkin said economic conditions are, “if anything, firming.” Boston’s Susan Collins backed last week’s hike, citing concern that inflation could stay above 2%. FXStreet puts the odds of another hike in October at about 53%, per the CME FedWatch tool. The dollar index climbed to around 101, a two-month high.

A booming economy, a Fed that’s still hiking, and a stronger dollar. Gold earns no interest, and that’s about the worst setup it can face.

The Oil Irony

The frustrating part is that this should have been a good week for gold.

Last week, falling oil was what lifted it. That was the story on this site on September 18. Crude has kept falling since. Yahoo Finance reports Brent down about 10% over five days, to under $96, on U.S.-Iran talks. Per Trading Economics, Tehran says it could reopen the Strait of Hormuz within seven days if the U.S. eases military pressure and lifts its blockade of Iranian ports.

Cheaper oil is supposed to cool inflation fears and take pressure off the Fed. But September’s input-cost spike already happened, and the PMI put it on the record. Oil falling from here is a forecast. The PMI is data. Today the Fed trade listened to the data.

Silver was around $65.72 early Wednesday, before the release. That’s up 5.5% on the week and 52.3% on the year, per Yahoo Finance. Gold is down about 4% from a month ago.

What This Means for Stackers

Nothing in today’s move changes how a monthly buying plan works. What it changes is what to watch.

The August PMI told you growth was strong. The September PMI tells you growth is now pushing prices up. That’s the version the Fed cares about, and it’s why a strong economy that lifted gold in August pushed it down today. If October’s hike odds keep rising, the pressure on gold has a clear source. If falling oil shows up in next month’s input-cost numbers, that pressure has a clear way out.

Next up is Thursday’s Trump-Xi summit, which FXStreet flags as the next event traders are watching. I wouldn’t read a lot into one day’s drop. I would read something into the reason for it.