CPI Becomes the Main Focus as Gold’s Bull-Bear Battle Escalates After US Midterm Election Turmoil!

A 5.2% rise marked gold’s strongest week since late August, although strong nonfarm payrolls figures weighed on the metal last Friday. That daily setback, set against the substantial weekly advance, illustrates the competing upward and downward pressures in the gold market. Strong jobs figures have increased expectations of an interest rate rise by the Federal Reserve, lifting both the dollar and US Treasury yields to gold’s detriment. Support nevertheless remains in place from geopolitical risks, purchases of physical gold and demand for safe-haven assets amid longer-term uncertainty.

October’s US CPI and PPI inflation readings will be in focus this week, together with addresses by several Federal Reserve officials. For gold, the main test of its direction may still lie ahead.

Geopolitical risks require continued scrutiny from investors. With a naval blockade on Iran already in place for several months, the US is increasing efforts to stop Tehran transporting advanced weapons systems and other sanctioned goods via its land borders and the Caspian Sea. Limited damage resulted from an attempted attack on the Saudi Aramco building in Riyadh, Saudi authorities reported. The weekend also brought an explosion and a major fire aboard a third tanker violating restrictions in the Strait of Hormuz. Progress in negotiations would make another US attack on Iran highly unlikely, US President Trump said. He also underlined the readiness of US forces to act, however, noting that three aircraft carriers were in position and on full combat alert.

A substantial reassessment of the Federal Reserve’s policy outlook followed the employment figures. CME’s FedWatch tool now puts the probability investors assign to a December rate hike at 80%. That compares with 72.8% before the nonfarm payrolls report and around 67% last Thursday. Gold faces tangible pressure from this change in expectations because higher interest rates make holding the non-interest-bearing asset more costly in opportunity terms.

The turbulence accompanying the AI boom is another development to watch. Last Thursday’s trading brought the Nasdaq its steepest one-day fall in 19 months; approximately $3 trillion was erased from the market value of the S&P 500. Concerns driving the sell-off centred on the possibility that tighter government rules governing AI infrastructure development after the US midterm elections could hold back economic growth. Worries about the outlook for AI briefly persuaded investors to reduce their substantial bets on a Federal Reserve rate hike next month. Underpinning that move was the view that weaker AI-related demand could temper economic growth and inflation alike, lessening the need for further monetary tightening.

Market Insight: Gold Faces a Test From Inflation Data

US inflation releases are expected to help set the tone for markets this week, as are speeches from several central bank officials. Developments in the US–Iran conflict, together with pronounced volatility in technology shares, could also leave traders watchful. October CPI and PPI readings are due from the US alongside weekly initial jobless claims. The inflation figures will be crucial to the Federal Reserve’s December interest rate decision. Should those readings indicate that price pressures remain persistent, expectations of a December rate hike could rise further and maintain pressure on gold in the near term. Conversely, gold’s appeal as a safe haven could regain prominence if inflation shows signs of easing or geopolitical tensions escalate again.