[Bearish for precious metals]
US September CPI comprehensively beat expectations, with the probability of an October rate hike surging to nearly 50%
On October 14, the US Bureau of Labor Statistics released September CPI data: up 3.7% YoY, with core CPI up 2.6% YoY, both above market expectations. Rising energy prices were a key factor pushing up overall inflation, while stickiness in core services inflation persisted. After the data release, the US dollar index jumped about 30 points in the short term, and the 10-year Treasury yield rose in tandem. The CME FedWatch Tool showed the probability of a 25bp rate hike in October raised to nearly 50%, and the market expects the US Fed may hike rates three more times cumulatively by the end of 2027. The inflation rebound reinforced rate hike expectations, directly pressuring the valuation of non-yielding precious metals.
Treasury yields held at 5.2% highs, with elevated real rates continuing to weigh on valuations
This week, the 10-year Treasury yield consolidated at highs around 5.2%, its highest range since 2007. Hawkish Fed policy expectations, sticky inflation, elevated fiscal deficits, and debt supply pressures jointly kept long-end yields high. The continued climb in real rates significantly increased the carrying cost of precious metals.
US dollar index broke above 102 to hit a new high for the year, with non-US currencies broadly under pressure
Driven by rising Treasury yields and warming expectations for US Fed rate hikes, the US dollar index strengthened persistently this week, breaking above the 102 level on October 14 to hit a new high for the year. The sharp dollar rally directly reduced the global allocation appeal of dollar-denominated precious metals, while the depreciation of non-US currencies weakened the purchasing power of investors outside China, exerting strong pressure on precious metals.
Fed Chairman Warsh's upcoming speech adds policy uncertainty, weighing on risk appetite
Fed Chairman Warsh will deliver a public speech on the evening of October 15 US time, his first major public remarks since the September FOMC rate hike and the most important policy guidance before the October meeting. The market is currently divided on whether to hike in October. After the CPI beat, the probability of a rate hike climbed rapidly, and wait-and-see sentiment is thick ahead of the meeting. Bulls are actively trimming positions, and volatility in precious metals has risen notably.
[Bullish for precious metals]
Fed "third-in-command" Williams sent dovish signals, hinting no further hikes may be needed in 2027
On October 13, New York Fed President John Williams said one more rate hike this year may be appropriate, but if the economic outlook aligns with expectations, there is no reason to think further hikes will be needed in 2027. He expects inflation to pull back notably next year and approach the 2% target, while highlighting the AI investment boom and energy prices as key risks. This statement provided the market with guidance on the expected policy endpoint, giving precious metals a temporary window of relief.
Concerns over the fiscal sustainability of US Treasuries persist, and demand for US dollar credit hedging remains in the long term.
The scale of US public debt continues to expand, and the Treasury Department keeps relying on expanded repurchase operations to maintain liquidity in the long-end Treasury market. The normalization of fiscal intervention and the tendency toward debt monetization weaken US dollar credit over the long term. Although elevated short-term Treasury yields weigh on precious metals valuations, in the medium and long term, high fiscal deficits and debt rollover pressures are driving institutions to keep increasing gold allocations for sovereign credit hedging. This structural demand provides bottom support for gold prices.
The US and Russia reached a diesel supply agreement, marginally easing energy inflation pressures.
On October 9, the US Treasury Department announced a temporary relaxation of sanctions on Russian diesel trade, with the authorization valid until April 7, 2027. On the same day, Trump and Putin reached an agreement in a phone call under which Russia will supply diesel to the US and global markets in phases. Driven by expectations of increased supply, US diesel prices pulled back slightly from historical highs, and energy inflation concerns eased for the time being. The market's sense of urgency about continued Fed rate hikes cooled marginally, providing a temporary window of relief for precious metals.
The global central bank gold buying trend continues, with official demand building a long-term floor.
The PBOC has increased its gold holdings for 22 consecutive months, with a single-month increase of 650,000 ounces in August, the highest monthly total since gold purchases resumed in November 2024. Sustained official sector buying reinforces the reserve diversification logic for gold, providing structural support for gold prices and placing substantial constraints on the downside.
[Macro Summary]
This week, the precious metals market overall showed a pattern of weak bottoming. Spot gold traded in the range of $4,100-4,180 per ounce, and after the September CPI came in above expectations, it fell further to $4,107. Macro headwinds dominated: the September CPI beat expectations across the board, pushing up the probability of an October rate hike; Treasury yields held at a high of 5.2%; and the US dollar index broke through 102 to hit a new high for the year, collectively weighing on precious metals valuations. On the positive side, only Williams' dovish remarks and the US-Russia diesel agreement provided temporary relief, while central bank gold buying and fiscal sustainability concerns offered long-term bottom support. Going forward, the market will focus on Warsh's speech on October 15, the Fed's FOMC meeting on October 29-30, and the evolution of geopolitical developments.
![US CPI Data Exceeds Expectations, Spot Platinum Market Premium Raised on Strong Consumption [SMM Daily Review]](https://imgqn.smm.cn/usercenter/OQqCm20251217171736.jpg)
