U.S. small-business optimism slipped again in May, with the National Federation of Independent Business reporting that its benchmark index dropped further below its long-run average while the share of owners planning to raise prices surged to the highest level in nearly four years.

The NFIB data paints a picture of a small-business sector caught between sticky inflation, geopolitical disruption, and fading confidence in the hiring outlook. For metals investors, the combination of rising price pressures and weakening real-economy sentiment reinforces the case for hard-asset insurance against a policy environment with no clean exits.

The NFIB Small Business Optimism Index fell 0.6 points to 95.3 in May, dropping further below its 52-year average of 98.0. The survey’s uncertainty index climbed three points to 91, running well above its historical average of 68. As Newsmax reported, the federation tied much of that uncertainty to the ongoing U.S.-Israeli war with Iran, now in its fourth month, and its cascading effects on energy costs and global commodity flows.

Price Plans Spike to July 2022 Levels

The inflation signal inside the NFIB survey was hard to miss. The share of small businesses planning to increase prices over the next three months jumped seven points to 34%, the highest reading since July 2022. That was the period when the Federal Reserve was still in the early innings of its rate-hiking cycle and consumer prices were running near multi-decade highs.

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Actual reported price increases told a similar story. About 36% of owners said they raised prices in May, up six points from April and the highest share since March 2023. The NFIB described that level as “well above the historical average of net 13%.”

Inflation ranked as the second most important problem facing small businesses, trailing only taxes. That ordering matters. Small-business owners tend to be practical about costs. When inflation climbs the priority list alongside the tax burden, it signals that input costs are biting into margins in ways that cannot be absorbed quietly.

The timing adds weight. The government confirmed it on Wednesday: the Consumer Price Index rose 4.2% year-over-year in May, the largest annual gain since April 2023 and a sharp acceleration from April’s 3.8% reading. The official data now says what small-business owners were already telling the NFIB: prices are reaccelerating, and the pressure is broad-based. It also fits the pattern we flagged in our coverage of rising corporate markups: once price increases get normalized, they tend to stick.

That kind of environment is familiar territory for gold. As we detailed in our coverage of the Fed’s preferred inflation gauge hitting a three-year high, sticky price pressures paired with softening growth create the worst possible backdrop for policymakers and the best possible argument for monetary metals.

The Strait of Hormuz Connection

The NFIB explicitly linked the deterioration in sentiment to the geopolitical backdrop. The federation stated that the U.S.-Israeli war with Iran has driven up prices of energy and other products shipped through the Strait of Hormuz, and those costs have stoked inflation across the domestic economy.

The federation’s commentary put it bluntly:

“Uncertainty is the enemy of growth and investment, and it is high. Much is related to the Iran war and its impact on the global oil supply and other commodities, the sooner it’s resolved, the quicker some ‘normality’ will be restored.”

That statement carries more weight than a typical survey commentary. The Strait of Hormuz is the world’s most critical oil chokepoint, and disruptions there ripple through diesel, shipping, petrochemicals, and fertilizer costs long before they show up in headline CPI. Small businesses, which lack the hedging programs and supply-chain leverage of large corporations, absorb those costs first and pass them on fastest.

A fragile ceasefire has since taken hold, and oil slid to a seven-week low on the news. But as we covered in our look at the post-ceasefire oil market, the supply damage and the inflation already in the pipeline do not reverse on a headline.

For precious-metals investors, the mechanism is straightforward. Energy-driven inflation acts as a tax on real economic activity while simultaneously undermining the purchasing power of cash and fixed-income holdings. Gold and silver have historically attracted capital during periods when inflation is supply-driven and policy tools are constrained. The current setup fits that pattern.

Hiring Plans Collapse to Pandemic-Era Lows

The labor-market data inside the NFIB survey offered a sharp contrast to the headline employment numbers. The share of owners planning to create new jobs in the next three months dropped four points to 9%, the lowest level since May 2020. The NFIB noted that “plans to hire are now below the historical average of a net 11%.”

The share of owners reporting job openings they could not fill also declined five points to 29%, likewise the lowest since May 2020.

These figures sit awkwardly beside the Labor Department’s employment report from the prior Friday, which showed three straight months of strong job growth and the unemployment rate holding at 4.3% for the third consecutive month in May. The divergence between the government’s payroll data and the NFIB’s forward-looking hiring indicators is worth watching closely. As we noted in our analysis of how strong May payrolls pushed rate-cut expectations further out, the official jobs picture has kept the Fed on hold. But the NFIB data suggests the small-business sector is pulling back on hiring intentions at a pace not seen since the pandemic shutdowns.

Some of the labor tightness appears structural. The NFIB cited wholesalers in Ohio reporting that applicants were not showing up for interviews or for work. In Michigan, the agricultural sector reported that labor is in short supply at all levels, a situation the source linked in part to an immigration crackdown.

What the Divergence Means

When large employers are still adding payroll but small businesses are pulling back on hiring plans and struggling to fill openings, it often signals a late-cycle squeeze. Small firms face higher marginal borrowing costs, thinner profit cushions, and less pricing power than their large-cap counterparts. They tend to feel the pinch of tighter financial conditions earlier and more acutely.

That dynamic has direct implications for the small-cap equity space, where options traders have already been loading up on puts as rate fears weigh on the Russell 2000. The NFIB data adds a real-economy data point to what the derivatives market has been pricing: smaller businesses and the stocks tied to them are under increasing stress.

The Inflation-Uncertainty Trap

The combination visible in the May NFIB report deserves careful attention. Consider the key readings together:

  • Optimism index at 95.3, well below the 52-year average of 98.0
  • Uncertainty index at 91, far above the historical average of 68
  • Planned price increases at 34%, the highest since July 2022
  • Hiring plans at 9%, the lowest since May 2020
  • Unfilled job openings at 29%, also the lowest since May 2020

Nobody would mistake this for an economy running hot: costs are rising, confidence is falling, and the labor market is sending contradictory signals depending on which data set you trust. The NFIB’s forward-looking indicators lean toward caution and contraction. The government’s backward-looking payroll data leans toward resilience.

Both can be true at the same time, for a while. But when small businesses start cutting hiring plans to pandemic-era lows while simultaneously planning the sharpest price increases in four years, the mix starts to look stagflationary. That word gets overused, but the mechanics here are plain: rising costs, falling confidence, and a labor market that is tightening from the supply side rather than loosening from demand destruction.

The bond market has been picking up on similar signals. As we covered in our look at how rising debt-servicing costs are flashing inflation warnings, the interest-rate backdrop is already constraining small-business borrowing capacity. Higher rates and stickier inflation make every capital decision more expensive and every margin thinner.

What This Means for Gold and Hard Assets

The NFIB survey does not move gold prices on its own. But it adds texture to a macro picture that has been building for months. Inflation is reaccelerating. Geopolitical risk is feeding directly into energy and commodity costs. Small-business confidence is eroding. Hiring intentions are collapsing. And the official employment data, which the Fed watches most closely, has not yet caught up.

That gap between leading indicators and lagging data is where policy errors live. If the Fed holds rates steady because payrolls look strong while small businesses are already retrenching, the risk of overtightening into a slowdown grows. If the Fed cuts because inflation expectations are rising, it risks validating those expectations and pushing real rates lower.

Consumer sentiment has been deteriorating in parallel. As we reported in our coverage of consumer sentiment sinking to record lows, the inflation anxiety visible among households mirrors what the NFIB is picking up among business owners. When both sides of the Main Street economy are worried about prices and pulling back on spending and hiring plans, the feedback loop can tighten quickly.

Gold tends to perform well in exactly this kind of environment: not a clean crisis, but a slow grind where purchasing power erodes, policy options narrow, and confidence in the official narrative frays at the edges. The NFIB’s uncertainty index at 91 against a historical average of 68 is a number that captures something real. Business owners are not panicking. They are hedging. They are raising prices because they have to, not because they want to. And they are pulling back on hiring because the outlook does not justify the risk.

For investors focused on capital preservation, the signal is the accumulation of evidence rather than any single survey or month. The economy is caught between forces that do not resolve easily: geopolitical inflation pressure, a labor market that is tight for structural reasons, and a policy apparatus that is running out of room to maneuver without creating new problems.

When the system’s own participants start behaving as though the future is less certain and more expensive, the case for holding assets that do not depend on someone else’s balance sheet gets harder to argue against.