Hotter US CPI Supports Dollar, Dents Gold

It’s been a wild week in financial markets in the wake of the US midterm elections. The Dow Jones Industrial Average has already delivered three separate 1,000-point swings, with sentiment toward the tech sector sitting firmly at the centre of those pivots. For now, the mood feels less doom-and-gloom than it did in the immediate aftermath of the Democratic sweep of Congress. Value buying after the recent sell-off, combined with a sense that enough AI data centres are already operating or approved and under construction, has helped stabilise the broader tech complex. Hardware demand still looks healthy, even if new data-centre projects are likely to face higher regulatory hurdles from here.

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Nvidia, long the poster child of the AI trade, has been the notable absentee from the rebound. Shares are down 11.5% over the past week as questions mount over CEO Jensen Huang’s future. The company already operates under tight US export controls on its most advanced chips to China; the latest developments raise the prospect of further scrutiny. It is an unambiguous reputational black eye for both Nvidia and its high-profile co-founder. Whether Huang remains in the role will ultimately depend on what the board’s internal investigation uncovers. In the meantime, the market is pricing genuine key-person risk, which is the possibility that the company could lose the visionary leader who has driven its extraordinary run.

On the macro front, this week’s calendar is dominated by US inflation data and its implications for a potential Federal Reserve rate hike in December. The first major reading arrived on Tuesday, with both headline and core CPI coming in hotter than expected. Coming on the heels of last Friday’s stronger-than-expected non-farm payrolls report, the numbers strengthen the case for the Fed to tighten again next month. Friday’s producer price index will show whether the pressure visible at the consumer level is being matched at the factory gate.

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The hotter CPI print, reinforced by hawkish comments from Fed Governor Chris Waller, who floated the possibility that a 50-basis-point move rather than the more conventional 25 basis points might be required, quickly re-ignited US Treasury yields. The 10-year yield pushed back to 5%, and the Dollar Index rose around 0.6% on the day. That combination of firmer yields and a stronger greenback exacted a predictable toll on gold, which slid 2.5%. Even so, the precious metal has managed to cling to the psychologically important $4,000 handle for now. Technical levels to watch include support at $4,022, $4,000 and $3,937 while resistance sits at $4,070 and $4,100.

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In the energy market, President Trump’s more conciliatory tone toward Iran since the elections has helped keep crude at levels that risk assets can live with. Brent is trading around $92 as traders lean toward the view that a diplomatic path currently looks more probable than a return to large-scale military strikes. History, however, cautions against complacency. Trump’s posture on Iran has shifted repeatedly and often abruptly since the conflict began, and oil prices have moved in lockstep. A renewed military escalation could quickly push prices higher again.