Gold (XAU) Price Forecast: Fed, CPI, and PPI Set the Stage for Gold’s Next Move

Gold Market Weekly Recap: Key Events and Price Movements

Gold prices faced a turbulent week as multiple economic factors weighed heavily on the metal’s performance, resulting in the steepest weekly decline in over five months. The main drivers behind this movement were a surging U.S. dollar, rising Treasury yields, and cautious signals from the Federal Reserve, all of which contributed to a bearish stance among traders.

Last week, XAU/USD settled at $2684.45, down $51.99 or -1.190%.

Election Outcome and Dollar Strength Pressure Gold

Following Donald Trump’s victory in the U.S. presidential election, the U.S. dollar strengthened significantly, adding downward pressure on gold prices. The dollar index gained 0.6% over the week, reaching its highest level since July, while spot gold fell 1.8%, reflecting traders’ risk-off sentiment as money flowed into assets poised to benefit from Trump’s economic policies. Trump’s anticipated fiscal and trade measures, particularly tariffs and tax cuts, stoked inflationary concerns, which, in turn, spurred higher bond yields. As a result, the 10-year Treasury yield climbed to 4.47%, diminishing the appeal of non-yielding assets like gold​​​.

Federal Reserve Rate Cut and Cautious Forward Guidance

The Federal Reserve cut rates by 25 basis points, bringing the federal funds rate to a range of 4.5% to 4.75%, aligning with market expectations. However, Fed Chair Jerome Powell signaled a cautious approach to future rate reductions, underscoring economic resilience and inflation expectations rather than rapid monetary easing. Market expectations for additional rate cuts were tempered as the FedWatch Tool now suggests a 75% probability of another quarter-point cut in December but a high likelihood of pausing in January, dampening any short-term bullish momentum for gold​​​.

Weak Demand in Key Physical Markets

In addition to macroeconomic pressures, physical demand for gold showed signs of weakness. In India, one of the largest consumers of gold, buying interest waned after robust festival sales, while demand in Japan and Singapore remained moderate. This decline in physical demand further weighed on market sentiment, adding to the overall bearish trend​.

Upcoming Economic Data: CPI and PPI Outlook

Looking ahead, traders are now focused on next week’s Consumer Price Index (CPI) and Producer Price Index (PPI) data, key indicators of inflationary trends that may shape future Fed policy. The CPI report, due on November 13, is projected to show a headline inflation rate of 2.6% year-over-year, up from 2.4% in September, with a 0.2% increase month-over-month. Meanwhile, PPI, which held steady in September, will provide additional insights into inflation pressures. A high PPI reading would likely support the dollar, as it suggests inflationary pressures in production costs, potentially leading to tighter Fed policy​​.

Market Forecast: Bearish Outlook as Dollar and Yields Rise

With a stronger dollar and rising yields, gold is positioned for potential downside risk in the coming week. If CPI and PPI figures align with forecasts, supporting the inflation narrative, the Fed’s cautious stance on rate cuts may further hinder gold’s appeal. Traders will watch closely for any signs that inflation data may prompt additional Fed tightening, likely sustaining the bearish outlook for gold.

Technically, the trend will change to down on a trade through $2604.39, while a move through $2790.17 signals a resumption of the uptrend. Given this trading range, trader reaction to its pivot at $2697.28 is likely to determine the direction of the market this week.