Robust employment statistics from the United States have significantly increased the likelihood of an interest rate hike by the Federal Reserve in December, with odds exceeding 80%.
As a result, it seems that officials at the Federal Reserve are pleased with the direction of economic growth.
However, the high levels of inflation continue to be a major issue that needs to be addressed as a priority.
The anticipation of a rate increase gained momentum following the release of compelling employment data, which revealed an increase of 165,000 non-farm payroll positions in October, far surpassing the projection of 56,000, and a decline in unemployment from 4.2% to 4.1%.
Moreover, the upward adjustments to the payroll numbers for August and September reinforce the view that the labour market has not shown the expected signs of weakness.
The recent employment gains have elevated the average employment figures recorded over the past three months, affirming that the hiring momentum from preceding months has not diminished as previously suggested. This scenario reinforces the prospects for a potential Federal Reserve rate hike.
Simultaneously, in reaction to the unexpected outcomes of the midterm elections, where the Democrats secured majorities in both chambers of Congress, oil prices experienced a sharp decline, US bond yields increased, and pressure on the US dollar, which had risen, began to ease. An in-depth assessment of the midterm election outcomes indicates that we can expect a more stable fiscal policy in the upcoming months, which could help limit rising deficits by reducing spending.
This financial projection could play a major role in the gains of US bond yields, which probably indicate a preference for safe investments.
Nevertheless, bond yields may still establish a floor and increase following the favorable employment data.
The decrease in oil prices can be interpreted as a hopeful response to anticipated diplomatic resolutions, prompting a reduction in oil premiums.
Nevertheless, this optimism appears to be premature, considering there have been no significant diplomatic agreements or signs of regular oil flows in the Middle East.
The ongoing energy disruptions not only affect the Strait of Hormuz but also exert pressure on numerous vital shipping routes, consequently disrupting the shipping industry’s infrastructure.
The resulting elevated energy costs are already leading to unrest and economic difficulties in countries that import oil.
Future oil prices are expected to depend on the extent of US military involvement in Iran or the reduction of conflict intensity, which is tied to the Republican Party’s electoral setbacks.
The midterm elections have evidently highlighted prevalent political concerns among the general population.
Prior to the elections, President Trump indicated that the United States would not take immediate action against Iran.
In summary, while oil prices may have moderated based on expectations, future developments will be shaped by concrete realities.
Conditions are expected to stabilise only if the conflict between the United States and Iran is resolved in a peaceful manner, leading to the restoration of normalcy, which requires the reopening of shipping routes to allow for the return of regular oil flows.
Additionally, it is pertinent to consider the OPEC report indicating that by the end of January 2026, the freight and insurance costs associated with large vessels had constituted 5% of total expenses, a stark increase from an average of 30% in October 2026.
This escalating cost is an additional financial burden borne by consumers, contributing significantly to inflationary pressures.
For oil-importing nations, the crucial issue lies not in the 5% to 10% decline in Brent crude prices, but rather in the substantial delivery costs associated with those imports. Freight and insurance expenses extend beyond oil, impacting the transportation of liquefied natural gas (LNG), food, fertilizers, chemicals, and other essential commodities.
It is vital to recognize that even if Brent crude prices decrease to $ 80 per barrel, buyers will still grapple with inflationary pressures and economic hardships, as the costs of shipping and insurance are ultimately borne by the importing countries, which is ultimately transferred to the consumer.
Pricing mechanisms typically operate on a Free on Board (FOB) basis, wherein the seller provides the oil at the port, while the buyer incurs all further costs. In contrast, a Cost, Insurance, and Freight (CIF) arrangement would include all associated expenses.
As a result, oil prices are expected to continue being a major burden until shipping costs return to normal rates.
The figures presented on the banks and financial institutions often underestimate the true burden of energy import costs, failing to accurately reflect the actual landed prices of oil and other commodities.
In the meantime, despite robust payroll and employment figures increasing the likelihood of higher inflation, a potential interest rate hike in the US, and a stronger US dollar, gold prices, after a brief dip, quickly rebounded.
This indicates that buyers remain enthusiastic about purchasing gold, leading me to adopt a cautiously optimistic outlook as the week begins.
Yesterday (Monday), gold needed to maintain its position above the $ 3990-$ 4000 range to continue rising. If it breaks through $ 4125 this week, it could see further gains. The next resistance level is at $ 4180.
However, I am uncertain if it can test or breach this level, as much depends on developments related to the Middle East.
To assess the next movements, we should monitor the 10-year bond yields; if they approach 5% and the DXY surpassing 102.80. Such shifts will likely hinder upward momentum, while any decline in these indicators will provide support for gold.
WEEKLY OUTLOOK - Nov 9-13
#GOLD @ $ 4070.30- At the start of this week, I am tentatively optimistic, although I anticipate the possibility of a decline later on. For gold to hit $ 4210, it needs to surpass $ 4150. There is support located at $ 3990 and $ 3950.
#EURO @ 1.1140- Euro might start the week on a softer note. It has support at 1.1050, which may prove to be resilient. If that level fails, the next support is at 1.1005. However, gains on the upside may be capped past 1.1250.
#GBP @ 1.3352- Buyers will be motivated to purchase during price dips. There is support at 1.3380 and 1.3349. If the price breaks past 1.3470, it could lead to a rise towards 1.3505. Otherwise, prices may decline again.
#JPY @ 158.50- The $/JPY pair is currently trading within a range. It may attempt to climb back up to 159.30 or higher. Conversely, if it falls below 157.20, it could lead to a decline towards 156.50.
Copyright Business Recorder, 2026
The writer is former Country Treasurer of Chase Manhattan Bank. The views expressed in this article are not necessarily those of the newspaper
He tweets @asadcmka