Spot gold extended its losses for the third consecutive day in early European trading on Thursday (November 12), falling to $3,950, its lowest level in over a week. Continued buying of the US dollar following strong US CPI data reinforced expectations of a Federal Reserve rate hike. Furthermore, uncertainty in the Middle East further supported the safe-haven dollar, which was considered a key factor putting downward pressure on gold.

Interest rate hike expectations: Overheated CPI and hawkish statements from officials drive 10-year yield back above 5%.

The October CPI report released earlier this week reinforced the prospect of further tightening by the Federal Reserve. Furthermore, hawkish comments from several influential FOMC members reaffirmed market bets on another Fed rate hike in December. Traders have also begun pricing in the possibility of a 50-basis-point rate hike next month. This prospect pushed the benchmark 10-year Treasury yield back above 5% on Wednesday and continued to provide tail pressure on the dollar. The CPI provides the data basis, official statements provide policy direction, and discussions about a 50-basis-point rate hike provide tail risks—these three factors combined have caused yields and the dollar to strengthen in tandem, while the opportunity cost of gold, as a non-yielding asset, has increased accordingly.

Institutional Interpretation: The market has fully priced in a December rate hike, and concerns about the Fed's credibility have dissipated.

Some analysts point out that the market's reaction to the latest hawkish signals from Federal Reserve officials—including Waller's inclusion of the risk of a 50-basis-point rate hike—went beyond an immediate repricing of the policy path. They note that the market is now "fully priced in a December rate hike," and crucially, these comments "have not sparked any real speculation that the Fed will refrain from raising rates due to political pressure." The firm adds that "concerns about weakened Fed credibility have dissipated since the Fed Chairman surprised the market with a hawkish stance at Jackson Hole in August." In their view, "last week's midterm election results showed fewer reasons to expect pressure from the White House," reinforcing the feeling that the Fed can proceed with its tightening program without significant political interference. The decline in gold prices is not solely driven by interest rates, but also by the institutional factor of "confirmed Fed independence"—when the market is no longer concerned about political interference, the path of rate hikes becomes more predictable and harder to reverse.

Geopolitical risks: US and Iran exchange attacks on islands in the Strait of Hormuz; US dollar index rises to highest level since April 2025.

Meanwhile, the US-Iran standoff over the Strait of Hormuz keeps geopolitical risk premiums in place. Both sides have recently attacked islands in the waterway: the US reportedly carried out a series of strikes on Iran's Qeshm Island, while Tehran attacked the ship navigation system on Didamamar Island in Oman, at the entrance to the Persian Gulf. Furthermore, the Deputy Chief of Staff of the Iranian Armed Forces stated that Tehran has closed this strategic waterway and will not reopen it unless ordered by the Revolutionary Leader. These factors have pushed the US dollar index to its highest level since April 2025 and support further gains. Geopolitical risks should benefit gold's safe-haven properties, but in the current environment, they have supported the US dollar more—because the dollar possesses both safe-haven and interest rate differential attributes, while gold only has safe-haven properties and no interest rate differential; this is precisely why gold has failed to benefit like traditional safe-haven assets in this round of geopolitical conflict.

Technical Analysis and Outlook: The path of least resistance is downward, and rebounds are more likely to be sold off.

The factors mentioned above suggest that the path of least resistance for gold prices remains downward, and any attempted rebound is more likely to be sold off. Traders are currently focused on US weekly initial jobless claims data and speeches by Federal Reserve officials; in addition, subsequent geopolitical news could bring volatility, providing some momentum for the dollar and gold. Under the triple pressure of a stronger dollar, rising yields, and solidified interest rate hike expectations, gold's rebound lacks fundamental support; $3950 is a key level in the near term, and a break below this level would open up further downside potential, while a rebound would require a weaker dollar or a easing of interest rate hike expectations to trigger.

in conclusion

Gold fell for the third consecutive day, retreating to a more than one-week low of $3,950, pressured by continued dollar buying and increased bets on interest rate hikes. Strong October CPI data and hawkish comments from several FOMC members solidified expectations of a December rate hike, with traders also pricing in a 50-basis-point increase, pushing the 10-year yield back above 5%. Analysts point out that the market has fully priced in a December rate hike, and concerns about weakening Fed credibility have dissipated—the expectation of less pressure from the White House after the midterm elections has lessened, allowing the Fed more autonomy to push for tightening. Geopolitically, the US and Iran's mutual attacks on islands in the Strait of Hormuz, and Iran's claim of closing the waterway, pushed the dollar index to its highest level since April 2025—geopolitical risks have supported the dollar more than gold in this round of conflict, as the dollar possesses both safe-haven and interest rate differential attributes. Technically, gold prices show a downward path of least resistance, with rebounds more likely to be sold off; $3,950 is a key level. Short-term trends depend on initial jobless claims data, Fed speeches, and geopolitical headlines—if the dollar and yields remain strong, gold prices may test below $3950; a meaningful rebound is more likely if rate hike expectations ease. At 15:41 Beijing time, spot gold was trading at $3959.14 per ounce.