On Wednesday, November 11th, spot gold rebounded slightly, partially recovering the losses from the previous trading day triggered by better-than-expected US inflation data and hawkish comments from Federal Reserve officials. The price fell approximately 2.6% in the previous session and is currently hovering around $4060 per ounce. The US October Consumer Price Index rose 0.4% month-on-month, and the core index rose 0.3%, both exceeding expectations. The market has already fully priced in the possibility of a 25 basis point rate hike by the Fed in December, with some pricing also incorporating the option of a larger adjustment. US Treasury yields and the US dollar index remained relatively stable after jumping the previous day, thus increasing the holding cost of gold as a non-interest-bearing asset, but the price still remained above $4000.

US inflation data and monetary policy expectations

The U.S. Bureau of Labor Statistics released data for October showing that the overall CPI rose 0.4% month-over-month, while the core CPI rose 0.3%, remaining at a high level for several consecutive months. Due to the lack of relevant data from the previous year, year-over-year data was not released, and market attention focused on the sustainability of the monthly changes. Chicago Fed President Austan Goolsby called the report "nearly disturbing," stating that "we have a real inflation problem at hand that we must address," specifically noting that service sector inflation had not shown a significant decline. Dallas Fed President Lori Logan indicated that at least two more 25-basis-point rate hikes are still needed, and the pace of rate hikes this winter may be faster than the pace already seen in the fall. Fed Governor Christopher Waller previously suggested that if the core CPI remains near or above 0.3%, a 50-basis-point rate hike in December could be considered to maintain policy credibility. Market pricing indicates that the probability of a 25-basis-point rate hike in December is almost fully priced in, and the option of a 50-basis-point hike has also increased. Higher real interest rates have increased the opportunity cost of holding gold, while a stronger dollar has increased the purchasing costs for buyers outside the dollar zone, constituting the main downward pressure in the near term.

Gold price performance and safe-haven demand

Spot gold has rebounded by about 0.7% after a sharp decline in the previous trading session. Despite rising borrowing costs, gold remains above $4,000, indicating that safe-haven demand is providing underlying support. Suki Cooper, Global Head of Commodities Research at Standard Chartered, noted in a report that prices have remained relatively robust during the stock market correction, and gold appears to be shifting away from its role as a liquidity provider. Central bank gold purchases remain intact, even as continued inflation and expectations of tighter monetary policy disrupt the short-term outlook. The US dollar index was essentially flat after jumping the previous day, thus providing gold with limited breathing room.

Technical Indicators

The daily chart shows that spot gold is currently trading near the middle Bollinger Band. The middle band is around $4077, the upper band is around $4239, and the lower band is around $3916. The current price is around $4060, falling between the middle and lower bands. The MACD indicator shows a DIFF value of -32.64 and a DEA value of -47.85, with the histogram showing a positive trend. Recent price fluctuations touched a low of around $3870, followed by repeated fluctuations around $4000. These indicators reflect that the price is fluctuating around the medium-term moving average, with the volatility narrowing compared to before, but without forming a sustained trend in one direction.

Structural factors and central bank gold purchases

Despite rising short-term interest rate expectations, structural factors continue to provide support. Central bank gold purchases remain intact, partially offsetting the impact of rising opportunity costs. Cooper noted that gold has remained relatively stable during the stock market correction, indicating a shift in its role from a simple liquidity tool to a broader asset allocation tool. The correlation between real yields and gold has weakened, with previous reports showing a reduced negative correlation with medium- to long-term real yields. Safe-haven demand persists amid geopolitical conflicts and uncertainty, but uncertainty surrounding the policy path also limits upside potential. Gold prices have therefore found support above $4,000 while facing continued pressure from a higher interest rate environment. The market is focused on subsequent inflation data and further statements from Federal Reserve officials to assess the extent of policy adjustments.

Frequently Asked Questions

Question 1: Why did the US October CPI data fully induce the market to price in a December rate hike? Answer: The overall CPI rose 0.4% month-on-month, and the core CPI rose 0.3%, both exceeding expectations and remaining high for several consecutive months. Goolsby stated that it was approaching a worrying level, and Waller suggested that if the core CPI remained at 0.3%, a larger adjustment could be considered. Therefore, the market fully priced in a 25 basis point rate hike. Question 2: Why did gold remain above $4,000 despite rising interest rate expectations? Answer: Safe-haven demand and continued central bank gold purchases provided underlying support. Cooper pointed out that prices performed steadily during the stock market correction, indicating that structural allocation demand offset some of the impact of rising opportunity costs. Question 3: What impact do the statements from Fed officials have on the cost of holding gold? Answer: Logan suggested at least two rate hikes, possibly at a faster pace. Waller and Goolsby emphasized persistent inflation, and market pricing reflected higher borrowing costs. The opportunity cost of gold as a non-interest-bearing asset increased accordingly. At the same time, a relatively stronger dollar increased the purchase cost.