Gold oversold, but further fall to $3,750 likely: Mirae Asset Sharekhan

Disclaimer: This article is written by Praveen Singh, Head of Commodities at Mirae Asset Sharekhan. Views expressed are his own. Readers' discretion is advised. Spot gold prices traded with a bearish bias for the third straight day on November 12 as hotter-than-expected US CPI inflation data for October and robust nonfarm payrolls have all but sealed expectations of a December Fed rate hike. The sell-off intensified as the yellow metal slipped below $4,000. 

The US President’s comment that there was no need for an Iran deal precipitated the fall.

At the time of writing this article, the metal was trading with a daily loss of 2.90 per cent at $3873. Gold, meanwhile, is down 10 per cent year-to-date (YTD).

Geopolitics and oil

Oil prices have fallen sharply after the US midterm elections on the notion that constraints on funding for Trump’s foreign initiatives would accelerate peace talks and eventually bring the eight-month-long war between Iran and the US to an end sooner rather than later.

Recovering oil and product flows in the Middle East have also been instrumental in pushing oil prices lower.

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Meanwhile, Iran is threatening to withdraw from the Nuclear Non-Proliferation Treaty. The semi-official Iranian Students’ News Agency reported that Iran’s Deputy Foreign Minister, Saeed Khatibzadeh, said that US-Israeli attacks on nuclear sites and the failure of the International Atomic Energy Agency to condemn them have “worn out” the Non-Proliferation Treaty and that the NPT is currently on life support. He added that Iran never received the benefits promised under the NPT framework.

Shaky-looking oil rebounded on Thursday as US President Trump commented that no Iran deal was needed. At the time of writing this article, Brent oil futures were trading at $95, up 2 per cent for the day. 

Data roundup

US weekly job data continue to show a ‘low hire, low fire’ scenario. Initial claims rose from 191K to 200K in the week ending November 7, while continuing claims fell from 1717K to 1697K in the week ending October 31.

US existing home sales fell from 3.97M to 3.75M, the lowest since August 2010. Sales were below the median estimate of 3.85M. Hurt by the highest mortgage rates since 2000, total sales were down 8.8 per cent y-o-y.

Earlier in the week, US CPI inflation came in hotter than expected in October. Headline CPI rose 0.4 per cent m/m, compared with expectations of 0.3 per cent, while core CPI rose 0.3 per cent m/m, versus expectations of 0.2 per cent. Core CPI increased 0.3 per cent m/m for the third consecutive month, pointing to persistent underlying price pressures. The October 2026 CPI report confirms that core CPI rose 0.3 per cent in August, September and October.

Boosted by tech services and AI, UK Q3 GDP, in the initial estimate, grew 0.7 per cent QoQ, up from the 0.5 per cent growth recorded in Q2, and 1.9 per cent y-o-y. This was the fastest quarterly growth rate since Q1 2024. Government spending rose 0.6 per cent (forecast: 0.5 per cent) after contracting 0.5 per cent in Q2.

Fedspeak

Federal Reserve Governor Michael Barr warned on Thursday that the rapid adoption of artificial intelligence risks deepening inequality in the near term as the labor share of income could decline and market concentration could increase. He added that policymakers need to be prepared for the possibility of serious short-term disruptions in the job market.

Federal Reserve Bank of Cleveland President Beth Hammack, one of the two dissenters who voted for a rate hike at the October 28 FOMC meeting, reiterated her call for higher interest rates to contain inflation amid demand pressures fuelled by AI investments. She added that it was critically important to bring inflation down to the Fed’s 2 per cent goal.

Chicago Fed President Goolsbee said that the hot inflation report was not a one-off and that the Fed is inching towards a tough spot.

It is worth noting that Fed Governor Christopher Waller said that if October inflation resembled the previous two monthly readings, with core CPI around 0.3 per cent or higher, a stronger policy response could be warranted. His hawkish comments have spurred rate-hike bets and ignited a sharp rally in the US Dollar as yields spike.

Dollar Index and yields

The Dollar Index continues to be buoyant on the hot CPI-induced rally. Extending its advance for the third straight day, the Index surged past 103 on November 12 to 103.23, its highest level since April 2025, just before the Liberation Day sell-off.

Two-year US yields jumped over 2 per cent to 4.84 per cent, the highest since October 14, on increased rate-hike bets.

At the time of writing, ten-year yields were up 1.73 per cent to 5.08 per cent, the highest since October 22. 

Gold ETF and COMEX inventory

As of November 12, total known global ETF holdings stand at 100.96 Moz, up 2.03 per cent (62.52 tons) YTD. Holdings have slid from the four-year high of 101.55 Moz as investors have partially liquidated their positions on rate-hike concerns.

Holdings are up 0.04 Moz (125 tons) since the beginning of the Iran war on February 28.

Registered COMEX inventory, currently at 14.24 Moz, is at its lowest level since January 31, 2025, as inventory has slid 0.47 Moz in November. Eligible COMEX gold inventory has risen by 0.29 Moz to 8.69 Moz this month. Thus, while COMEX registered gold inventory declined by 0.47 million oz in November, eligible inventory increased by 0.29 million oz. The inventory moves suggest that a substantial portion of the decline in registered stocks may reflect reclassification rather than physical withdrawals. Total warehouse inventory fell by only 0.18 million oz.

Upcoming data

Major US data on the cards in the near term include October PPI, October retail sales (November 17), October import price index (November 17), October housing starts (November 18) and the November Philadelphia Fed Business Outlook (November 19). Minutes of the October 28 FOMC meeting will be released on November 19.

Traders will monitor the UK’s October CPI (November 18), Eurozone Q3 GDP (November 13) and October final CPI (November 18).

China’s October retail sales, new home prices, industrial production and property investment data (all on November 16) will also keep traders engaged.

Outlook

Gold is quite oversold; however, further weakness is likely amid a stronger US Dollar and higher yields, supported by a strong US economy, as traders position for the December FOMC meeting.

In the short run, the shiny metal may extend its decline to test support around $3750. If that support yields, the metal may extend its decline towards the $3600 mark. Resistance is seen at $3950/$3975/$4000/$4080.