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Weighed down by stronger-than-expected U.S. inflation data and robust employment figures, London spot gold suffered three consecutive days of steep declines. On November 10, gold opened at $4,140.93 and fell all the way to close at $4,032.62, a single-day drop of 2.62%. On November 11, the slide continued, closing at $3,987.70, down 1.11%. On November 12, selling pressure was released in a concentrated wave, with prices touching an intraday low of $3,852.35 before closing at $3,876.62, a sharp fall of 2.79%. The three-day losing streak erased more than $260 in total, with the metal successively losing the $4,100 and $4,000 round-number support levels.
Behind this rapid correction in gold prices lies a dramatic shift in market expectations. The earlier rally, which had been fueled by midterm election optimism, was quickly given back, and many long positions that chased the highs bore significant unrealized losses in a short period. Such violent swings are essentially the result of a rapid reversal in monetary policy expectations combined with a concentrated wave of profit-taking, rather than being driven by any single factor. Catalyzed by U.S. inflation and employment data that continued to beat expectations, the market raised its expectations for how long the Federal Reserve would keep rates high, further amplifying the downward pressure on gold, said Xu Yaxin, a researcher at the Beijing Gold Economy Development Research Center, in an interview.
The core trigger for the international gold selloff was U.S. inflation data that kept exceeding expectations, prompting the market to reprice the Fed's monetary policy path. The latest data showed that both the October CPI and core CPI came in above market expectations, with inflation stickiness re-emerging and dashing hopes for an early rate cut. Treasury yields rose quickly while the dollar strengthened in tandem, raising the holding cost of non-yielding gold and triggering a concentrated wave of selling, Xu said.
Recent U.S. economic data have shown many shifts, especially several key releases since early November. First came the monthly nonfarm payrolls report at the start of the month: the market expected 65,000 to 70,000 new jobs, but the actual figure came in at 165,000, far surpassing expectations. Second, unemployment rate and wage growth data also pointed to an employment market that has not cooled, showing that monetary tightening has not delivered an obvious shock to the labor market. The October CPI data also shifted: U.S. October 2026 CPI rose 0.4% month-on-month, above the 0.3% market expectation and versus a prior reading of 0.6%; core CPI rose 0.3% month-on-month, above the 0.2% expectation and unchanged from the prior reading, marking the third straight month that core CPI held at a 0.3% monthly pace. The most critical risk signal in this report is that, after the energy-driven impulse faded, core inflation did not cool in response. The main inflation driver has shifted from energy to domestic-demand services and goods, showing structural diffusion, and resistance along the disinflation path has actually increased rather than decreased, said Yuan Zheng, an analyst at Galaxy Futures, in an interview.
In addition, after the U.S. midterm elections, Democrats won a congressional advantage, which has already influenced policy expectations in the short term. Xu said that in the immediate aftermath of the elections, the market priced in expectations of constrained fiscal expansion and eased deficit pressure, sending Treasury yields lower and driving a sharp gold rally. But Democratic control of Congress mainly limits large new tax-cut bills, while existing welfare spending remains rigid and difficult to compress quickly, so long-term deficit pressure has not disappeared. That is also why the underlying logic supporting gold has not been completely broken, though short-term inflation and rate expectations are now dominant and have temporarily overshadowed fiscal positives.
As gold prices continue to swing, the battle between bulls and bears in the market has clearly intensified, with gold ETF outflows and active position reduction by speculative accounts magnifying the scale of this correction. Many trading institutions have already raised their pricing for a longer period of high rates from the Fed, and some have even begun reassessing the possibility of a rate hike at the December policy meeting. Industry participants say upcoming high-frequency data such as PPI and initial jobless claims will become key gauges for the market to judge inflation persistence. Once services-side inflation remains stubborn, long-end Treasury yields still have room to rise further, and short-term adjustment pressure on gold has not yet fully cleared. Still, the rigid demand from global central banks continuing to buy gold remains a floor for prices, and potential geopolitical disruptions will not disappear entirely. In the short term, rate pricing dominates the market; over the medium to long term, the key question is when rate-cut expectations will return after high rates gradually bite into the U.S. economy. Investors should not simply interpret this correction as the end of the gold bull market.
It is worth noting that several Fed officials have recently released hawkish signals. Fed Governor Waller said that if core CPI rises 0.3% or more month-on-month, the Fed should raise rates by 50 basis points in December, and that he would vote for a hike in December regardless of the inflation data. Dallas Fed President Logan believes at least two more 25-basis-point hikes are still necessary, and that the pace may need to be faster than in the fall. Richmond Fed President Barkin said the Fed should act cautiously in tackling inflation, which remains the biggest risk. At the same time, the earlier surge in gold had accumulated a large number of short-term long profits, and once expectations turned, concentrated profit-taking amplified the decline. The market believes there is scope for further tightening of U.S. monetary policy, reinforcing expectations that rates will stay high for longer, which in turn further suppresses gold prices.
As gold prices continue to swing, the factors influencing price trends have drawn outside attention. In this regard, Yuan said that in the short term, the focus should be on the direction of Fed monetary policy, specifically employment, inflation and geopolitical events (mainly transmitted through oil price expectations); strong employment, rising inflation and no easing in U.S.-Iran tensions would all add momentum to monetary tightening. Over the medium to long term, the key items to track are the scale of U.S. debt and central bank gold purchases, which together form the long-term buying force supporting gold in a de-dollarization context.
At the same time, Xu said the core drivers for gold ahead will still revolve around three main threads: U.S. inflation, Fed policy signals and geopolitical risk. The dollar still has momentum to strengthen further in the short term; if inflation stickiness does not fade and the Fed's hawkish tone remains unchanged, the dollar index will find it easier to rise than fall. But a stronger dollar is not a one-way trend; once inflation cools and employment weakens, the dollar's strength could reverse quickly.
Regarding gold's later trajectory, Xu said this is not a stage for blindly chasing longs, nor for directly bottom-fishing after a sharp drop. This roller-coaster ride fully shows that gold volatility has risen, and heavily positioned or highly leveraged traders can easily lose money in rapid pullbacks. In trading, it is advisable to reduce position sizes and treat the short term with a range-bound mindset, waiting for data signals to become clearer. The underlying logic for being medium-term bullish on gold (high U.S. debt and geopolitical uncertainty) remains intact, but investors need to wait for a turning point in rate expectations, build positions in batches and set strict stop-losses. The short term is in a phase of volatile bottoming, and a one-sided bullish view requires clear signals of a turn in inflation and Fed rhetoric. Controlling leverage and managing capital well are the most important risk-control principles in the current market, Xu said.
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