Written by Gold surrenders to gravity
Gold plummeted more than 5% yesterday, after hitting a new record high of $4,381.46. Although Trump’s easing rhetoric on the US-China trade relationship may partly explain a retreat in the safe-haven metal, it does not justify a more than 5% tumble.
The precious metal had been defying gravity this year, rising more than 50%, bolstered by geopolitical developments, economic uncertainty, strong central bank buying and aggressive Fed rate cut expectations. Yesterday’s slump may have just been a profit-taking move after the steep surge, with investors seeking to reenter the market at more attractive levels.
Today, the price hit support at the uptrend line drawn from the low of August 22 and rebounded strongly. If the bulls are willing to stay in the driver’s seat, they could soon rechallenge, or even breach Monday’s record high of $4,381.46.
Although market participants will remain focused on trade developments and negotiations, they are likely to pay attention to the delayed US CPI data for September on Friday. Considering that the market disagrees with the Fed on how many rate cuts may be warranted next year, any surprises in the CPI numbers could move markets, including gold, accordingly.
Yen tumbles as Takaichi becomes PM, pound falls on CPIs
The yen was the main loser yesterday among the major currencies, after Takaichi’s confirmation as Japan’s Prime Minister. Takaichi, a well-known fiscal dove, is already preparing a stimulus package that is intended to help households tackle inflation and has also expressed opposition to the Bank of Japan’s plans to raise interest rates.
That said, according to a Reuters poll, the majority of economists believe that the BoJ will press the hike button by the end of the year. That said, according to Japan’s Overnight Index Swaps (OIS) market, investors are not equally convinced. The probability of a 25bps rate increase by December has dropped to around 45%, with such a move not fully priced in until March.
The pound took a hit today after the UK inflation data for September revealed that the headline CPI rate remained unchanged at 3.8% y/y, confounding expectations of an acceleration to 4.0%. The core rate dropped to 3.5% y/y from 3.6%. The data comes in contrast with the BoE’s projection of slightly stickier inflation in September, allowing traders to continue assigning a strong 75% chance of another rate cut by the end of the year.
Dollar gains, Wall Street mixed amidst earnings season
The US dollar extended its recovery yesterday, but that was not due to a rise in Treasury yields or investors scaling back their Fed rate cut bets. Actually, yields retreated somewhat, while according to Fed funds futures, investors continued anticipating two more rate cuts this year and three in 2026.
It seems that the greenback drew its strength from the weakness in the yen and gold. Should the CPI data on Friday reveal some stickiness in inflation, and the PMIs some economic resilience, some further dollar recovery may be possible.
On Wall Street, the Dow Jones closed in positive territory, after hitting a new record high, while the S&P 500 remained virtually unchanged. The Nasdaq finished the session slightly lower.
Although Netflix dropped in after-hours trading after the firm missed earnings targets, 87% of the 78 companies in the S&P 500 that have reported so far have beaten expectations. Today, it will be the turn of Tesla to announce its results after the closing bell. The firm has already announced a record 497,099 vehicle deliveries in Q3 2025, which marks a 7% increase from the same quarter last year. Based on that, strong revenue metrics may be reported, likely providing support for the company’s stock price.
by XM.com
