US Inflation Stickiness and Geopolitical Rift Keep Dollar Firm; Gold Volatile

USD resilience and Gold volatility dominated markets this week as a confluence of sticky inflation data, Federal Reserve infighting, and geopolitical escalation created a complex trading environment.

Stuck in the Middle: Inflation & Fed Policy

Recent data from the US Department of Labor suggests the “last mile” of inflation fighting is proving treacherous. While the Consumer Price Index (CPI) met expectations, the Producer Price Index (PPI)—a leading indicator for consumer costs—surprised to the upside.

• PPI Data: November PPI rose 3% YoY, with Core wholesale prices climbing 3.5%, the highest since March.
• The Implications: The persistence of wholesale price pressures challenges the disinflation narrative, signaling that the Federal Reserve may not have the luxury of aggressive easing in the near term.

This data has deepened the schism within the FOMC.

• The Doves: Governor Stephen Millan remains aggressive, advocating for a massive 150 basis point cut this year.
• The Hawks/Realists: Minneapolis Fed President Neel Kashkari expressed uncertainty, questioning if policy is tight enough.

Trump, Powell, and Institutional Stability

Adding to the macro noise, President Donald Trump addressed rumors regarding the Fed Chair. In an interview with Reuters, Trump stated he has “no plans” to fire Jerome Powell, despite an ongoing Justice Department investigation into Fed renovations.

While Trump noted it is “too early” to make final decisions, this temporary truce removes a layer of institutional risk premium from the USD.

Geopolitics: The “Blitzkrieg” Factor

Safe-haven flows into Gold (XAU/USD) remain supported by rising Middle East tensions. Reports suggest Trump is seeking a “quick, decisive” military action regarding Iran, rather than a prolonged conflict. With Tehran threatening retaliation against US bases in the Gulf, the geopolitical risk premium is preventing a deeper correction in precious metals, even as the Dollar strengthens on yield support.

Technical Outlook

• Analyst View: The greenback is currently caught between a “high-for-longer” rate narrative (Bullish USD) and geopolitical fear (Bullish Gold/Swiss Franc).
• Key Level: Traders should watch the 103.50 level on the DXY.