Market Overview
On Thursday, spot gold fell 2.9% to $3,874.04 per ounce while gold futures dropped 3.1% to $3,878.57 per ounce, extending a five‑session decline of 5.2% as the U.S. dollar index gained 1.6% against a basket of six major currencies. The dollar’s advance was driven by stronger‑than‑expected U.S. economic data that revived expectations of further Federal Reserve tightening.
U.S. Economic Data Driving the Move
The latest U.S. jobs report showed non‑farm payrolls increasing by 165,000 in October, well above the consensus forecast of 65,000, and revisions added a combined 84,000 jobs for August and September. In addition, the Consumer Price Index for October rose 0.4% month‑on‑month, easing from a 0.6% increase in September but still exceeding the 0.3% market expectation. Core CPI, which excludes food and energy, held steady at 0.3% month‑on‑month, slightly above the 0.2% consensus.
Fed Rate‑Hike Expectations
Given the combination of a robust labor market and persistent inflation, market participants have priced in a high probability of a Fed rate increase in December. The CME FedWatch tool indicated an approximately 85% chance of a 25‑basis‑point hike and about a 15% chance of a larger 50‑basis‑point move. Fed Governor Christopher Waller reinforced the hawkish stance, stating he would support a rate hike even if inflation data were cooler, and suggested a 50‑basis‑point increase could be justified if data remained strong.
Impact on Gold and the Dollar
Higher interest‑rate expectations typically depress non‑yielding assets such as gold and bolster the dollar, making gold more expensive for foreign buyers. The recent dollar surge therefore contributed to the 3% slide in gold prices.
Oil Market and Geopolitical Context
Brent crude futures rose 3.3% to $95.80 a barrel, adding pressure on gold from the commodities side. In a Truth Social post, President Donald Trump asserted that the United States does not need a deal with Iran, echoing earlier statements that further strikes were unnecessary. The comment followed a Wall Street Journal report that U.S. Vice President‑designate JD Vance was exploring in‑person talks with Iranian security chief Mohsen Rezaei, a move the publication linked to Republican concerns over the war’s impact on midterm election performance. Earlier in the week, Brent had fallen to its weakest weekly level since April 2020 amid expectations that a Democratic‑controlled Congress would push for diplomatic resolution. Energy traders also remained wary of Iranian attacks on vessels in the Strait of Hormuz and Houthi targeting of Saudi energy infrastructure.
Analyst Commentary
David Morrison, senior market analyst at Trade Nation, noted that gold and silver have not yet reclaimed the lows reached at the end of the previous month, and that the recent rally attempt was quelled by the dollar’s jump on rate‑hike expectations. He highlighted the August price peak and subsequent sell‑off, questioning whether the market has found a bottom or faces another leg down.