Dollar Jumps and Gold Falls on Hot US CPI and Hawkish Fed Comments

The dollar index (DXY00) is up by +0.43% today.  The dollar is moving higher today on hawkish comments from Fed Governor Christopher Waller, who said he supports a 25 bp Fed rate hike in December, and is open to a 50 bp move if inflation stays elevated.  The dollar added to its gains today after T-note yields jumped when US Oct CPI rose more than expected, a hawkish factor for Fed policy.  Dollar gains are limited today after WTI crude oil prices fell more than -1% to a 2.5-month low, easing inflation expectations and potentially persuading the Fed to loosen monetary policy, a bearish factor for the dollar.

US Oct CPI rose +0.4% m/m, stronger than expectations of +0.3% m/m.  Oct core CPI rose +0.3% m/m, stronger than expectations of +0.2% m/m.  The Bureau of Labor Statistics did not publish year-over-year data for 2026 CPI because it had no October 2025 data due to the federal government shutdown.

Fed Governor Christopher Waller said he supports a Fed rate hike in December, and warned that if inflation continues to accelerate, he would support a half-percentage-point increase to protect the Fed's credibility.

The markets are now pricing in a 100% chance of a +25 bp rate hike at the FOMC’s next meeting on December 8-9. 

EUR/USD (^EURUSD) gave up an overnight advance and is down by -0.40%.  The euro retreated today after the stronger-than-expected US Oct CPI report bolstered the outlook for a Fed rate hike next month and sparked a rally in the dollar. 

The euro initially moved higher today on hawkish comments from ECB Governing Council member Martins Kazaks and ECB Chief Economist Philip Lane, who expressed their support for tighter ECB monetary policy. Also, today’s -1% fall in crude oil prices toa 2.5-month low is supportive for the Eurozone economy and the euro, as Europe imports most of its energy.

ECB Chief Economist Philip Lane said, "If the information set we have in December is exactly the same as the information set today, then I think it would be prudent indeed to hike" interest rates. 

ECB Governing Council member Martins Kazaks said a "hawkish edge" is appropriate for monetary policy, and "so far, it seems that some further tightening from today's perspective would be warranted."

The markets are now pricing in a 90% chance of a +25 bp rate hike at the ECB’s next policy meeting on December 17. 

USD/JPY (^USDJPY) is up by +0.44% today.  The yen is under pressure today from weaker-than-expected Japanese economic news, including Sep household spending and the Oct Eco-watchers outlook survey.  Yen losses accelerated today after the dollar and T-note yields jumped on the stronger-than-expected US Oct CPI report.  On the positive side for the yen is today’s -1% decline in crude oil prices to a 2.5-month low, which is positive for Japan’s economy and the yen, as Japan imports more than 90% of its energy.

Japan Sep household spending fell -6.8% y/y, weaker than expectations of -3.0% y/y and the biggest decline in 6 years.

The Japan Oct Eco-watchers outlook survey fell -0.9 to 46.5, weaker than expectations of 47.1.

The market is pricing in an 82% chance of a +25 bp BOJ rate hike at its next meeting on December 18.

December COMEX gold (GCZ26) is down -57.20 (-1.39%) today, and December COMEX silver (SIZ26) is down -0.758 (-1.44%).

Precious metals are falling today amid a stronger dollar.  Also, today’s stronger-than-expected US Oct CPI report pushed T-note yields higher and boosted the chance of a Fed rate hike next month to 100% from 82% on Monday, a bearish factor for precious metals.  In addition, hawkish central bank comments are weighing on precious metals after Fed Governor Waller signaled his support for a Fed rate hike next month, and ECB Governing Council member Kazaks and ECB Chief Economist Lane signaled their support for tighter ECB monetary policy.

Losses in precious metals are limited today as a slide in stocks has boosted some safe-haven demand for the metals.  Also, today’s -2% decline in crude oil prices to a 2.5-month low has lowered inflation expectations and could prompt the world’s central banks to ease their monetary policies, a bullish factor for precious metals.

Recent fund support for precious metals is bullish for prices, as long holdings in gold ETFs climbed to a 4.25-year high on October 21, although those holdings have since backed off.  Long holdings in silver ETFs rose to a 7.75-month high last Tuesday.

Strong central bank demand for gold is supporting gold prices.  Recent World Gold Council data showed cumulative gold purchases by global central banks in Q3 were 321,000 MT, the most since Q4 of 2024.  Also, Sunday’s news showed that bullion held in China's PBOC reserves rose by 830,000 ounces to 78.30 million troy ounces in October, the largest increase in three years and the twenty-fourth consecutive month the PBOC boosted its gold reserves.

On the date of publication, Rich Asplund did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.