CPI Moves into Focus After US Midterm Election Turmoil as Gold Bulls and Bears Step Up Their Battle!

Gold’s weekly advance reached 5.2%. This was its best weekly performance since late August, despite pressure last Friday from strong nonfarm payrolls data. A weak session within a strong week shows how bullish and bearish drivers are pulling the gold market in different directions. Robust employment figures have strengthened expectations of a Federal Reserve rate hike. The resulting gains in the dollar and US Treasury yields have weighed on gold. Yet geopolitical risks, physical buying and safe-haven demand linked to longer-term uncertainty continue to underpin the metal.

Gold may only now be approaching the real test of its direction. This week’s focus turns to October US CPI and PPI inflation figures and speeches from several Federal Reserve officials.

Geopolitical developments also warrant investors’ continued attention. The US has enforced a naval blockade on Iran for several months and is now intensifying measures to block Tehran’s transport of advanced weapons systems and other sanctioned goods across land borders and through the Caspian Sea. According to Saudi authorities, an attempted attack on the Saudi Aramco building in Riyadh inflicted limited damage. An explosion and a major fire struck a third tanker violating restrictions in the Strait of Hormuz over the weekend. US President Trump said progress in negotiations would make another US attack on Iran highly unlikely. Nonetheless, he stressed that US forces were prepared to act, with three aircraft carriers deployed and on full combat alert.

An 80% probability of a December rate hike is now priced in by investors, according to CME’s FedWatch tool. Before the nonfarm payrolls report, that figure stood at 72.8%, compared with around 67% last Thursday. The employment release has therefore materially reshaped expectations for the Federal Reserve’s policy path. This repricing places tangible pressure on gold: as interest rates rise, so does the opportunity cost of holding an asset that generates no interest.

AI-related market turbulence remains another focus. Last Thursday’s daily decline was the largest in 19 months for the Nasdaq, while approximately $3 trillion in market value was lost by the S&P 500. Selling was driven by fears that, after the US midterm elections, tighter government regulation of AI infrastructure development could restrain economic growth. Investors briefly cut their substantial bets on a Federal Reserve rate hike next month as concerns about AI’s outlook took hold. Their calculation was that slower AI-related demand could dampen growth and inflation, reducing the urgency of further monetary tightening.

Market Insight: Inflation Sets Gold’s Next Test

The Federal Reserve’s December interest rate decision will depend crucially on the forthcoming October US CPI and PPI readings. These releases, together with speeches from several central bank officials, are expected to steer market sentiment this week. Weekly initial jobless claims are also due. Traders could remain on alert for developments in the US–Iran conflict and sharp moves in technology shares. If inflation figures continue to signal persistent price pressures, expectations of a December rate hike could strengthen, prolonging near-term pressure on gold. Alternatively, cooling inflation or renewed geopolitical escalation could put gold’s safe-haven appeal back in focus.