Gold Falls Near $4,000 As Strong U.S. GDP Fuels Fed Hike Outlook

Gold (XAU/USD) dives over 1% on Thursday after a tranche of US economic data cemented the case for another rate hike by the Federal Reserve (Fed) at the December 9 meeting. At the time of writing, XAU/USD trades at $4,019 after reaching a high of $4,069.

XAU/USD tumbles as resilient growth and elevated inflation reinforce December tightening expectations

The Greenback is extending its losses, with the US Dollar Index (DXY), which tracks the buck's performance against six peers, down 0.18% at 101.96. This was sparked by the Federal Reserve’s decision to hold rates unchanged and by the lack of forward guidance from Fed Chair Kevin Warsh on Wednesday.

Following the decision, money markets priced in an 84% chance of a 25-basis-point rate hike. Since then, they trimmed the odds to 81%, according to Prime Terminal.

Gold prices pushed up to $4,035 before making a U-turn to current levels on the release of US data. Gross Domestic Product (GDP) in Q3 rose 3.4% YoY, above forecasts of 3.2% and up from 2.2% in the previous quarter. Also, the Fed’s preferred gauge of inflation, the Core Personal Consumption Expenditures (PCE) Price Index, rose to 3.1% YoY as expected, signaling the Fed has work to do on its price stability mandate.

After economic growth and inflation data, the jobs market is faring well, with Initial Jobless Claims for the week ending October 24 cooling from 195K to 194K, below forecasts of 199K.

Tensions in the Middle East eased after US Vice President JD Vance sought to revive peace negotiations by writing to Mohsen Rezaei, head of Iran's Supreme National Security Council. Even though Oil prices drifted lower, bullion has failed to recover amid expectations of higher interest rates.

The US 10-year Treasury yield is flat at 4.999%, after reaching a low of 4.949%. This, along with uncertainty about the outcome of the November 3 US midterm elections, keeps Gold prices steady.

Next week, the docket will feature the ISM Manufacturing and Services PMI, Factory Orders, the JOLTS survey, Initial Jobless Claims and October’s Nonfarm Payrolls data.

XAU/USD technical outlook: Drops towards $4,000 as sellers eye YTD low beneath $3,970

Gold price shows sellers are dominating the action as XAU/USD falls below Wednesday's daily low of $4,025, poised to test last week’s low of $3,975 if Gold dives below $4,000. Momentum favors further downside as the Relative Strength Index (RSI) edges lower towards oversold territory.

On the other hand, buyers can reclaim some control if Gold clears the $4,100 mark. Once done, the next stop is $4,200, followed by the 100-day and the 50-day Simple Moving Averages (SMAs) at $4,217 and $4,269, respectively.