High US yields lift December Fed hike odds as gold edges below $4,000

• Gold retreats beneath $4,000 as losses continue for a second day.
• US Core CPI remains at 0.3% MoM, beating forecasts for a third month.
• US Treasury yields touch 5% as the probability of a December Fed hike rises to 87%.

A stronger-than-forecast US inflation reading and hawkish remarks from Federal Reserve (Fed) policymakers have led traders to fully price in an interest rate increase, leaving Gold (XAU/USD) lower for a second consecutive day on Wednesday. XAU/USD stands at $3,999 at the time of writing, a decline of 0.70%.

Gold falls further as elevated US inflation, rising Treasury yields and hawkish Fed comments weigh

October’s US Consumer Price Index (CPI) rose 0.4% MoM, easing from 0.6% but surpassing the 0.3% forecast. Attention centred on the underlying measure, however, after Fed Governor Christopher Waller warned that he would favour a 50 bps rate increase if core inflation reached 0.3%. With Core CPI coming in at 0.3% MoM for a third consecutive month, against expectations of 0.2%, investors moved to fully price in a 25 bps hike at the December meeting.

The CME FedWatch Tool indicates that markets assign an 87% probability to a Fed rate increase of 0.25%, with only a 13% chance of a 0.50% rise.

Bullion consequently drifted lower, reflecting the non-yielding metal’s tendency to perform well when interest rates are lower.

A rise of nearly 12 basis points took the US 10-year Treasury yield to 5%, lending support to the US Dollar. Measuring the currency against a basket of six peers, the US Dollar Index (DXY) has advanced 0.67% to 102.90, its highest level this year.

Hawkish comments also came from other Fed officials. Philadelphia Fed’s Anna Paulson said the “Fed will move more aggressively if inflation landscape worsens,” while Dallas Fed’s Lorie Logan said rates could be raised “more rapidly.”

A more measured stance came from Fed Governor Michelle Bowman and Kansas City Fed President Jeffrey Schmid, although both emphasised that inflation remains high. In Bowman’s view, persistent inflation indicates that further work is needed. Schmid, meanwhile, pointed to worrying price trends beyond the broader energy picture.

Thursday’s US calendar includes Initial Jobless Claims, housing figures and speeches from Fed officials, with the Producer Price Index (PPI) due on Friday.

XAU/USD technical outlook: Gold breaks below $4,000 as further losses come into view

Sellers are gathering momentum after Gold broke below the $4,000 threshold, bringing five-day lows into view. A lower low for a third consecutive trading day points to the possibility of additional losses.

A bearish turn in the Relative Strength Index (RSI) also signals that sellers hold the upper hand.

Initial support for XAU/USD lies at $3,919, the daily low recorded on November 4. Next comes the October 30 year-to-date low of $3,879. On the upside, $4,000 represents the first significant resistance level. Breaking above it would open a path towards the psychological $4,050 area and then $4,100. Beyond those levels, attention turns to the confluence of the 50- and 100-day Simple Moving Averages (SMAs), which stand at $4,177 and $4,200 respectively.