CPI Takes Centre Stage After US Midterm Election Turmoil: How Is the Gold Bull-Bear Battle Intensifying?

Gold ended the week 5.2% higher, its strongest weekly showing since late August, even as robust nonfarm payrolls data put prices under pressure last Friday. That divergence between daily weakness and a sizeable weekly advance highlights the competing bullish and bearish influences on the gold market. Strong employment figures have bolstered expectations of a Federal Reserve rate hike, lifting the dollar and US Treasury yields while weighing on gold. Countering those pressures, geopolitical risks, physical purchases and demand for safe havens amid longer-term uncertainty remain supportive.

Gold’s directional outlook faces a potentially decisive test this week, with US October CPI and PPI inflation readings and speeches from several Federal Reserve officials set to dominate attention. The real test may only now be getting under way.

Geopolitical developments remain another area investors need to watch closely. Having maintained a naval blockade on Iran for several months, the US is intensifying efforts to prevent Tehran from moving advanced weapons systems and other sanctioned goods across its land borders and through the Caspian Sea. An attempted attack on the Saudi Aramco building in Riyadh caused limited damage, according to Saudi authorities. A third tanker breaching restrictions in the Strait of Hormuz was hit by an explosion and a major fire over the weekend. US President Trump described a further US attack on Iran as highly unlikely if negotiations progressed. He nevertheless emphasised that US forces stood ready to act, with three aircraft carriers in position and on full combat alert.

Expectations for the Federal Reserve’s policy trajectory changed markedly after the employment report. Investors now assign an 80% probability to a December rate hike, according to CME’s FedWatch tool, compared with 72.8% before the nonfarm payrolls release and around 67% last Thursday. For gold, that repricing creates tangible pressure: higher interest rates raise the opportunity cost of holding an asset that pays no interest.

Volatility linked to the AI boom warrants close attention as well. The sharpest daily fall in 19 months hit the Nasdaq last Thursday, while approximately $3 trillion in market value was wiped off the S&P 500. Behind the selling were concerns that stricter government regulation of AI infrastructure development after the US midterm elections could constrain economic growth. For a brief period, unease about AI’s prospects led investors to pare back their sizeable bets on a Federal Reserve rate hike next month. The rationale was that softer AI-related demand could slow economic growth and ease inflation, making additional monetary tightening less urgent.

Market Insight: What Could Shape Gold’s Next Move?

Market sentiment this week is expected to take its cues from US inflation figures and remarks by several central bank officials. Traders could also remain on alert as the US–Iran conflict evolves and technology stocks experience sharp fluctuations. Alongside weekly initial jobless claims, the US is due to publish October CPI and PPI data, crucial inputs for the Federal Reserve’s December interest rate decision. Persistent price pressures in the inflation readings could further reinforce expectations of a December rate hike, leaving gold under near-term pressure. By contrast, evidence of easing inflation or a fresh escalation in geopolitical tensions could return gold’s safe-haven appeal to the spotlight.