Gold (XAU/USD) tanks nearly 2.8% on Thursday as market participants priced in higher odds of a 50 bps December rate hike by the Federal Reserve (Fed). The XAU/USD trades at $3,874 after touching a yearly low of $3,852.
Hawkish Fed rhetoric arrives alongside higher Oil prices
Bullion prices remain on the back foot as more Fed officials turned hawkish, underpinning the Greenback.
The Cleveland Fed's Beth Hammack said the inflation outlook is worsening, though she supports a gradual approach to raising interest rates. The Chicago Fed's Austan Goolsbee said that inflation has been “well above target,” while the San Francisco Fed's Mary Daly recognized that further tightening is needed and that inflation pressure “is up, not down.”
US jobs data was slightly weaker than expected as Initial Jobless Claims for the week ending November 7 increased by 200K above estimates of 195K and the previous reading of 191K. Still, the labour market is solid, as Continuing Jobless Claims dipped from 1.717 million to 1.697 million.
Other data showed that Existing Home Sales dipped -5.5% from 3.97 million to 3.75 million, compared with September’s print.
The US Dollar Index (DXY), which tracks the performance of the buck’s value against six currencies, is up 0.34% to 103.48, near 19-month highs.
In the meantime, US President Donald Trump posted on social media that the US does not need a deal with Iran, leaving the door open for further strikes, contradicting what did he said two days ago about no need for new strikes.
West Texas Intermediate (WTI), the US crude Oil benchmark, rose 2.7% to $88.79 per barrel, fueling speculation that gasoline prices will increase and raising the chances that the Federal Reserve will raise rates.
Money markets had priced in an 85% chance of a 25-basis-point rate hike in December and a slim 15% chance of a 50-basis-point move, according to the CME FedWatch Tool. Just a week ago, the market had zero chance of a 50 bps hike.
Ahead, the US economic docket will feature the October Producer Price Index (PPI) data on Friday.
XAU/USD technical outlook: Gold collapses over 2.5% beneath $3,900
Despite a decline, Gold has recovered some ground but trades below $3,900 after touching a year-to-date (YTD) low of $3,852. Momentum, as measured by the Relative Strength Index (RSI), along with price action, signals further downside.
XAU/USD's first support is $3,852. Below that, the next support is $3,800, followed by key psychological levels, but the next area of interest is the April 22, 2025, swing high-turned-support at $3,500.
Conversely, the first key resistance is the $3,900 mark, followed by the high of the day at $4,000. On further strength, the next resistance is $4,100, ahead of the confluence of the 50-day Simple Moving Average (SMA) at $4,165 and the 100-day SMA at $4,199.
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