Fed Holds, Gold Breaks $3,900: Weekly Market Recap

Week of October 26 to October 30, 2026

Four central banks, one Budget, and almost no surprises from any of them. The Fed held, the Bank of Canada hiked, the ECB and the Bank of Japan held, and the UK Budget landed exactly as planned. Yet markets still had a rough week, with gold falling to its lowest level of 2026 and tech stocks closing out their worst month since early 2025. The lesson of the week: markets move on surprises, not on scheduled events. Here is where the surprises actually came from.

The Fed kept rates at 4% on Wednesday, as expected, but the vote was split 10 to 2. Governor Lisa Cook and Cleveland Fed President Beth Hammack both voted for another hike. Chair Kevin Warsh said growth is strong, inflation is too high and politics played no role in the decision, six days before the midterm elections. He also announced a procedural change: starting in 2027, some Fed meetings will focus on broader strategy without a rate vote, leaving fewer scheduled chances to change rates. The statement struck a patient tone, saying more information will help the committee decide its next step.

The real surprise came the next morning. The US economy grew at a 3.4% annualized pace in the third quarter, up from 2.2% and above forecasts, and September PCE inflation rose 0.5% for the month to 3.6% for the year. Core PCE, the Fed's preferred measure, rose to 3.1%. Market odds of a December hike jumped to around 84%, up from about 60% before the Fed meeting. In plain terms, the Fed paused, but the data immediately made the case for it to resume tightening in December.

Elsewhere, the scheduled events played out as planned. The Bank of Canada raised rates to 2.50%, its first hike since July 2023, to stop high energy prices from spreading into broader inflation. The ECB held at 2.50%, and President Christine Lagarde announced she will step down early, on February 7, 2027. The Bank of Japan held at 1.25% but said its underlying inflation trend has reached the 2% target for the first time since 2013, and Governor Kazuo Ueda pointed to a possible hike in December. The UK Budget matched expectations almost to the pound, and gilts actually rallied. Each of these was well priced in, so each produced only a small reaction.

The bigger shocks came from outside the central bank calendar. Big Tech earnings disappointed: Alphabet had its worst day in more than 20 years, Amazon reported record cash burn from AI spending, and Intel fell almost 29% on Friday, its worst day since the 1970s. In the Strait of Hormuz, a tanker was hit by limpet mines on Friday, the first attack of that kind since the war began in February. Oil finished October up about 15%. This is the useful lesson: an event only moves markets to the extent it differs from what was already expected. Knowing what is priced in matters more than knowing the calendar.

The Dow ended a three-week winning streak, falling 1.09% on Friday as the tech sell-off spread. The index barely moved on the Fed decision itself, which was fully expected. The damage came from earnings: Alphabet's stock had its worst day in more than two decades after reporting negative free cash flow, and Intel's 29% collapse on Friday, after a weak forecast, deepened the sell-off across the market. Still, the Dow's October tells a story of resilience. It gained 1.7% for the month, while the tech-heavy Nasdaq lost 5.3%, its worst month since March 2025. Money continues to rotate away from AI spenders toward more traditional companies, and small caps actually rose this week.

Gold fell another 2.7% this week and broke below $3,900 on Friday, its lowest level of 2026. It is now roughly 30% below its January record near $5,595 and down about 6% in October, its worst October since 2008. The drivers are the same ones we have tracked for three weeks, just stronger. Hot PCE inflation and strong GDP lifted the odds of a December Fed hike, which increases the cost of holding a metal that pays no interest. At the same time, the tech sell-off and margin calls pushed investors to sell liquid assets like gold to raise cash. Last week, gold briefly tested $4,000; this week, that level gave way.

Oil posted its fourth straight weekly gain and finished October up about 15%, its strongest month since July. The week's high came on Friday, when a tanker in the Strait of Hormuz was struck by limpet mines, the first attack of that kind since the war began in February. Houthi attacks on Saudi energy facilities continued, and traders are positioning for the possibility of renewed US and Israeli strikes on Iran after Tuesday's midterm elections. Brent's expiring December contract settled at $117.64, while the new front-month January contract settled at $113.43, so the Brent price quoted next week will look about $4 lower even though nothing has changed. OPEC+ meets on Sunday.

The euro dipped below the 1.1155 area that had held as a floor for three weeks, closing near 1.1126 on Tuesday before recovering only partly. The ECB kept its deposit rate at 2.50%, and said rising energy prices pose upside risks to inflation and downside risks to growth. Private-sector growth across the eurozone slowed to its weakest pace in four months in October. Lagarde's announcement that she will step down early produced little market reaction, since analysts expect the ECB's approach to outlast any single leader. The bigger pressure on the euro was the gap with the US: strong American growth and a likely December Fed hike contrast with a European economy slowing under high energy costs.

Sterling held steady through one of its biggest risk events of the year. Chancellor John Healey's first Budget kept the government's fiscal rules intact, with borrowing almost exactly matching forecasts and £15 billion of headroom. The Debt Management Office also cut planned issuance of long-dated gilts to £15.5 billion from £22.4 billion, which helped longer-term gilts rally. That is a notable shift from earlier this month, when the 30-year gilt yield set records above 6%. With the Budget out of the way, attention turns to Thursday's Bank of England decision, where markets price a near-certain hike to 4.00%.

The Bank of Japan sounded more hawkish than it has in months, yet the yen still weakened for the week. The BoJ held at 1.25% in an 8 to 1 vote, with one member pushing for a hike to 1.5%, and declared that underlying inflation has reached its 2% target for the first time since 2013. Governor Ueda signaled strong prospects for a December hike. The yen strengthened briefly after the decision, but US forces won out: strong GDP, hot PCE inflation and rising Fed hike odds kept the interest rate gap firmly in the dollar's favor. That is the key point: a hawkish BoJ is not enough on its own when the Fed is also expected to hike.

The Bank of Canada raised its policy rate to 2.50%, its first hike since July 2023, and said further increases may be needed to stop high energy prices from spreading into broader inflation. Governor Tiff Macklem said the Bank now expects inflation to reach about 3.5% by the end of the year, although it will proceed carefully. The loonie barely moved on the decision, because markets had fully expected it after Macklem's comments earlier in the month. Oil's fourth straight weekly gain added steady support, and the pair finished just below 1.40, at the lower end of its recent range.

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This was the biggest central bank week of the year, and almost none of the decisions moved markets much. The moves came from what nobody had fully priced: strong US data, disappointing earnings and a new kind of attack at sea. Before any big event, it helps to ask what the market already expects, because that is the bar the news has to clear. Next week brings an election, a Bank of England decision and the jobs report, so keeping position sizes modest and staying patient remains the steadiest approach.

Fed'n Markets

Sources: Federal Reserve, US Bureau of Economic Analysis, Bank of Canada, European Central Bank, Bank of Japan, Reuters, CNBC, Bloomberg, Yahoo Finance, DTN, EnergyNow, CME FedWatch, Financial Modeling Prep (closing price data).

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