Gold plunged to 3,850.00, and this is not just a correction: the market has undergone a fundamental repricing. US inflation proved too hot for the Federal Reserve to ease, employment data confirmed the economy is not slowing, and Trump's rejection of a deal with Iran finally removed the metal's geopolitical respite. The dollar and equity indexes are rising for exactly these reasons — investors are shifting into assets that benefit from high rates, while gold, which yields nothing, became the main loser.
What specifically crushed gold
- Inflation broke the "peak rates" narrative. October core CPI rose 0.3% month-on-month — the third month in a row — beating the 0.2% forecast. For the market, this signaled that the Fed will not only hold rates steady but may act more aggressively. Fed member Christopher Waller said outright that, given such data, a 50-bp hike might be required.
- Employment data removed the last argument for a pause. Initial jobless claims came in at 200k versus 195k expected. Although slightly above the forecast, the number remains near historic lows and confirms the labor market is intact. That means the Fed has no reason to ease.
- The dollar soared to a 19-month high. The DXY broke 103.08, returning to April 2025 levels. For dollar-priced gold, this is a direct hit: the metal becomes more expensive for holders of other currencies.
- Trump rejected a deal with Iran, and that worked against gold. He wrote on Truth Social: "We do not need a deal with Iran. Those days are over. We have their money, hundreds of billions, and we have their strait!" That killed hopes for a diplomatic settlement that had been supporting gold on Monday. Oil jumped immediately (Brent above $93), and for gold this was negative: higher oil - stronger inflation expectations - even more hawkish Fed - higher real rates - pressure on the metal. The paradox is that geopolitics normally supports gold as a safe haven. But in the current configuration, the market trades not fear but inflation via oil.
Why stock indexes are rising
Indexes and the dollar rise not despite this logic, but because of it. The equity market focuses on economic resilience rather than rates per se. Strong employment data imply consumer demand and corporate earnings will remain high. The Dow Jones rose 0.5%, the S&P 500 1.3%, and the Nasdaq 1.6%. Investors buy stocks because the US economy looks strong, and the Fed's rate hikes are a response to that strength, not to weakness.
The essence of the paradox
Gold and equities operate in different coordinate systems:
- For equities, strong data = good (earnings rise).
- For gold, strong data = bad (rates stay high; opportunity cost of holding the metal increases).
As long as this divergence persists, gold will remain under pressure even if the dollar and equities continue to rise in tandem.
Key events to watch
- Friday, Nov 13, 13:30 GMT — US Producer Price Index (PPI) for October. This is the main trigger at week's end. If PPI is strong, odds of a 50-bp move will increase, and gold could test 3,884 and lower. If PPI is weak, there's a chance for a technical bounce toward 3,965–4,012.
- Continued Fed commentary. After Waller, the market will watch any hints of more aggressive tightening. Speeches by New York Fed President John Williams and other officials can intensify or ease pressure on gold.
- Geopolitical backdrop — Iran negotiations and the Strait of Hormuz. After Trump's statement, hopes for a deal largely vanished; any escalation will return a risk premium to oil. For gold, this is double-edged: higher oil boosts inflation expectations, which supports Fed hawkishness.
What's next for gold
The immediate fork in the road is Friday's PPI. Technically, gold is already in oversold territory, but momentum is strong. OCBC notes the macro environment has turned less favorable, but the bank "does not flip to a bearish medium-term stance." That implies: short-term — continued pressure; medium-term — a chance for recovery once the market digests the Fed's hawkish scenario.
