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Morning Edition · Friday, November 13, 2026Published at 12:14 AM EST · New York
Rate-Hike Bets Lift the Dollar to a 19-Month High and Push Gold to a 13-Month Low
The 10-year Treasury yield is holding above 5% after a hot October inflation report, and markets now treat a December Fed hike as the base case, with some traders weighing a half-point move.
Markets have stopped asking when the Federal Reserve will cut rates. They are now asking how much it will raise them. The dollar index rose to a 19-month high, its strongest level against a basket of major currencies since April 2025. Gold fell to its weakest level in 13 months.
The change started with the October Consumer Price Index (CPI). Core prices rose 0.3% from September, against the 0.2% economists expected, CNBC reported. Christopher Waller, a Fed governor, then said the Federal Open Market Committee (FOMC) should consider a half-point increase in December if inflation ran hot. After his comments, CME FedWatch data showed traders pricing a 91% chance of a quarter-point hike and a 9% chance of a half-point move. The 10-year Treasury yield briefly crossed 5% on November 10. It was still above 5% on Thursday evening. In October, 10-year and 30-year yields reached 24-year highs, according to CNBC.
Gold took the largest hit among the monetary metals. It fell to a 13-month low near $3,850 an ounce on Thursday and then rose about 0.9% to near $3,915 in early Friday trading, FXStreet reported. BullionVault said the hawkish repricing took about $150 off the price in a single move. Oil links the energy shock to monetary policy. Investing.com tied the bets on larger hikes to crude near $96 a barrel, and ANZ has warned of a 50-basis-point hike in December, according to FXStreet. Bitcoin fell below $70,000 as the dollar climbed.
From a sound-money view, the Fed now faces the results of earlier credit expansion. An oil-supply shock, layered on years of cheap money, has raised the price level, and the central bank is answering with higher rates. Rising real yields raise the cost of holding gold, which pays no interest. For now that outweighs gold's role as protection against debasement. The strong dollar also cuts against the desk's thesis that the dollar's reserve role is eroding. In a tightening phase, global borrowers still need dollars to service dollar debt.
Part of a tracked trend
Renewed Fed Tightening Fears Rattle Global Markets
Over the next 3-6 months stronger US data revives expectations of Fed rate hikes, driving a firmer dollar, equity selloffs in export-heavy markets, and pressure on hard assets as the IMF warns of recurring economic shocks.
What this means
The channel is the real interest rate. Higher policy-rate expectations raise Treasury yields and the dollar. That squeezes holders of long-duration bonds, emerging-market borrowers with dollar debt, the yen and Asian importers, and it raises the cost of holding gold and leveraged crypto positions. A December hike is now largely priced. What is new is open talk of a half-point move from a sitting governor. The consensus may be wrong in treating these hikes as a cure for inflation. Much of the price pressure comes from oil supply, which rate increases do not fix, so the Fed risks tightening into a supply shock and slowing growth. The clearest precedent is 2022. Gold fell for most of that year as the Fed hiked and the dollar rose, then gained once markets began to price the end of the cycle. The desk's read is that dollar strength and pressure on gold will likely persist into the December FOMC meeting, provided core inflation and oil stay firm. The reversal would come in the months after, once the market sees a peak in rates. This read is wrong if the next inflation data come in soft, or if oil falls far enough that Fed officials start talking about a pause. Either would weaken the dollar sooner and lift gold before any hike is delivered.
What to watch
- Fed officials' speeches before the December meeting. If more of them endorse a half-point move, the hike cycle is growing beyond what is priced. If they talk about a pause, the dollar's rally is near its end.
- The gap between short and long Treasury yields. If long yields fall while short yields rise, bond buyers expect the hikes to cause a slowdown, which has historically come before a turn higher in gold.
- Brent crude. Oil near $96 is part of the case for hikes, so a sustained fall would weaken that case directly.
Observations to monitor, not financial advice.
Synthesized from: Investing.com Commodities · CoinDesk · Bitcoin Magazine
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Comments
1Nov 13, 5:14 AM · edited
If the next core CPI print returns to the 0.2% economists expected for October, the 9% half point probability should fall toward zero, since Waller tied the larger move to hot inflation.