Market Drivers
US 10-year Treasury yields and the US dollar continued to decline during Thursday’s trading session, helping gold recover from the selling pressure that emerged following the US Consumer Price Index (CPI) report. Meanwhile, stronger-than-expected Producer Price Index (PPI) and retail sales data triggered a less severe reaction in gold than Wednesday’s inflation figures.
US PPI rose 1.3% month over month, significantly exceeding expectations of 0.6% and accelerating from the previously revised 0.5% reading.
Retail sales increased 0.8%, beating forecasts of 0.3% but slowing from the previous month’s 1.3% growth. Core retail sales also climbed 0.9%, above expectations of 0.6% but below the previous reading of 1.4%.
Meanwhile, regional manufacturing indicators delivered mixed signals. The Philadelphia Fed Manufacturing Index fell from 37.8 to 20.9, while the NY Empire State Manufacturing Index rose from 7.60 to 25.50.
Kevin Warsh Keeps Markets Guessing
One possible reason gold avoided a deeper decline despite stronger-than-expected economic data was that investors preferred to wait for comments from Federal Reserve Chair Kevin Warsh at the ongoing International Monetary Fund (IMF) meetings.
Warsh participated in a question-and-answer session with IMF Managing Director Kristalina Georgieva.
During the discussion, Warsh said the global economic environment had generally evolved in line with the Fed’s expectations since the September FOMC meeting. He reiterated the central bank’s commitment to price stability but declined to offer specific guidance on its remaining policy decisions in 2026.
The Fed has two scheduled policy meetings remaining this year, in October and December. Warsh described these meetings as important opportunities to assess economic growth, employment conditions, and inflation.
His cautious approach came as little surprise. Warsh has repeatedly argued that the Fed should avoid communicating its intentions too explicitly, allowing markets to form their own assessments of economic conditions. He has also consistently resisted providing advance signals about future interest rate decisions.
AI Investment Could Complicate Inflation
Much of Warsh’s discussion focused on investment and artificial intelligence (AI). He described the surge in structural investment as an important positive development for the global economy.
According to Warsh, AI technology has the potential to boost productivity and generate greater economic wealth. However, the transition is likely to be uneven, while its short-term impact on employment remains uncertain.
He also noted that AI investment could increase demand before productivity gains deliver supply-side benefits that help ease inflationary pressures. This dynamic could make it more challenging for central banks to assess economic data and determine the appropriate monetary policy response.
If AI-related investment increases spending in the near term while productivity improvements take longer to materialize, inflationary pressures could intensify before the longer-term benefits emerge.
This view aligns with Warsh’s previous argument that current interest rates may not be sufficiently restrictive to slow economic activity.
The Fed is also scheduled to hold an AI-related hearing in the San Francisco Bay Area on November 16. Meanwhile, its next monetary policy meeting is scheduled for October 27–28.
Economic Data and Geopolitics Remain in Focus
The next major US economic release is industrial production, scheduled for 20:15 WIB. The data is not expected to have a significant impact on gold unless it delivers a substantial surprise.
Investors will also monitor whether other Fed officials make additional comments following Warsh’s remarks at the IMF meetings.
Geopolitical developments remain another key factor heading into the end of the trading session. There have been no significant changes in the Middle East, with market concerns still centered on tensions involving the Houthis and Saudi Arabia, developments in oil markets, and diplomatic mediation between Iran and the United States.
Any de-escalation in geopolitical tensions could support further gains in gold by easing uncertainty and potentially reducing inflation concerns associated with energy prices. Conversely, an escalation could complicate the market outlook and limit gold’s upward momentum, depending on its impact on the US dollar, Treasury yields, and safe-haven demand.
Treasury Yields Could Determine Gold’s Next Move
Beyond economic data and geopolitical developments, US Treasury yields are likely to play a crucial role in determining gold’s next direction.
Warsh’s remarks did not prove as hawkish as some market participants had feared, leaving bond yields as an important driver for the precious metal.
If US Treasury yields continue to decline, gold could extend its recovery as lower yields reduce the opportunity cost of holding a non-yielding asset.
Conversely, a rebound in Treasury yields could put renewed pressure on gold prices and potentially force traders to reconsider their strategies, including shifting from buying to selling.
For now, the direction of US Treasury yields remains a key signal for gold traders as they weigh the latest economic data, the Fed’s policy outlook, and geopolitical risks.