Could anyone explain how a 125kHz RFID sensor works while fully enclosed stainless steel? From what I thought I knew this shouldn't work at all, especially reading a stainless steel tag. Any ideas?
Stainless steel often has a relative permeability close to 1 , so it won't shunt magnetic fields. It will shield the signal a bit due to eddy currents, but as long as the steel is thinner than its skin depth, some signal will still get through.
plus, if there is even the slightest break or seam anywhere in the box, rf currents can get inside. If it were me, I would not count on it, and have some sort of outside antenna feeding thru plastic or glass-to-metal seals to the inside of the box.