XAU – Strong CPI Drives Dollar Higher, Gold Experiences Volatile Swings

Gold fell significantly on Tuesday, plunging nearly 3% in a single session to break below the 4,100 threshold and hitting a low of $4,013. The latest U.S. Consumer Price Index (CPI) data for October came in higher than expected, coupled with signals from multiple Federal Reserve officials indicating a potential acceleration in the pace of rate hikes. This pushed the U.S. dollar back up and sent U.S. Treasury yields surging sharply. Data showed that headline CPI rose 0.4% month-over-month in October, slightly lower than September's 0.6%, but noticeably higher than economists' prior consensus of 0.3%. Core CPI, which excludes food and energy, rose 0.4% month-over-month for the third consecutive month, also exceeding the market expectation of 0.2%. While overall inflation cooled due to retreating energy prices, the continued upward momentum in the core component indicates that price pressures are spreading more broadly into goods and services rather than remaining localized to a few volatile sub-items.

Federal Reserve Governor Christopher Waller explicitly stated prior to the data release that if core CPI rose 0.3% month-over-month or higher, the central bank should consider more aggressive policy action at its December meeting, including the possibility of a 50-basis-point rate hike. He emphasized that with inflation levels remaining overly high and price pressures showing signs of broadening, taking only smaller rate hikes could undermine the Fed's credibility in curbing inflation. Dallas Fed President Lorie Logan also pointed out that "moving faster may be possible" compared to September's 25-basis-point hike, noting that the current federal funds rate target range remains too low and is exacerbating inflationary pressures. Kansas City Fed President Jeffrey Schmid bluntly stated that inflation remains his primary concern and that the current policy stance is "fairly accommodative." These remarks resonated with the hotter-than-expected core inflation data, significantly revising market pricing for the Fed's subsequent policy path.

Prior to the release of the inflation data, market pricing for a 50-basis-point rate hike at the December Fed meeting was near zero; following the release, the associated probability briefly surged to the 10% to 15% range, while expectations for at least a 25-basis-point hike were almost fully priced in. The 2-year U.S. Treasury yield surged 18.44 basis points to 4.731%, marking its largest single-day jump since early April 2025; the 10-year Treasury yield rose 12.6 basis points to 4.99%, hitting its highest level since October 29. The U.S. dollar index strengthened in tandem, touching a high of 102.40 and exerting downward pressure on gold. Please note that Wednesday is Veterans Day in the U.S., and U.S. stock markets will remain open as usual.

From a technical perspective, gold prices broke through the key dividing line of $3,961 last week, transforming this level from a breakout point into an important current support reference. Charts show that the 9-day moving average has just crossed above the 25-day moving average to form a golden cross, and gold prices also broke through the two-month-old descending trendline last week. However, prices remain constrained by the 25-day moving average currently situated at $4,076. If prices can hold steady above this zone in the near term, this bounce momentum is expected to be maintained. Conversely, failure to hold its ground will lead back to range-bound consolidation in the near term. Additionally, gold is currently near the top of the descending channel in place since September; it must break through and stabilize in the $4,083 to $4,088 range to reverse the recent weakness. On the upside, targets include $4,097, $4,151, and $4,204 sequentially, with a further attempt at $4,258. On the downside, $4,004 can be viewed as a short-term pivot. While gold managed to defend this level on Tuesday, caution is warranted against the risk of a test toward the 0.618 retracement level at $3,975 if this support gives way.

London Gold – November 11:

Forecasted early range: 4054 – 4078
Resistance: 4099 – 4144 – 4189
Support: 4011 – 3967 – 3944

SPDR Gold Trust Holdings:
November 2: 1,040.51 tonnes
November 3: 1,037.66 tonnes
November 4: 1,040.51 tonnes
November 5: 1,040.51 tonnes
November 6: 1,041.37 tonnes
November 9: 1,042.51 tonnes
November 10: 1,042.22 tonnes

10/11 AM London Gold Fix: $4,073.7 
10/11 PM London Gold Fix: $4,050.9

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