Can gold avoid a weekly rout as high US yields bolster Fed rate hike bets?

• Gold’s modest recovery on Friday leaves it on course for a 4.50% weekly loss.
• US 10-year Treasury yields climb to 5.15% while the US Dollar scales 19-month highs.
• Hot US inflation figures lift the probability of a December Fed rate hike towards 90%.

A modest rebound has done little to ease the pressure on Gold (XAU/USD), which remains on track for a weekly loss of nearly 4.50%. The metal is trading 0.14% higher on Friday as the US Dollar (USD) pares its advance following a hot US producer inflation report. XAU/USD stands at $3,879 at the time of writing, close to 13-month lows.

Does Gold’s nearly 4.5% slump reflect a stronger Fed rate-hike case after US inflation?

The prospect of a Federal Reserve (Fed) interest rate increase at its December meeting has grown following this week’s US inflation releases. October’s Producer Price Index (PPI), published earlier, showed headline inflation accelerating to 6.5% YoY. Although below forecasts, the reading exceeded September’s 6.3%, driven largely by higher transportation and warehousing prices. Excluding items such as food and energy, core PPI held at the previous month’s 5%, matching estimates.

Together with Tuesday’s US Consumer Price Index (CPI) release, these figures drew responses from most Fed officials. Many of those speaking this week anticipated higher interest rates and observed that financial conditions were not restrictive.

Further rate increases are in view for San Francisco Fed Mary Daly, who said on Friday that firms are seeking to pass on higher costs. Boston Fed Susan Collins, meanwhile, cautioned that broadening inflation justified additional rate hikes. Chicago Fed Austan Goolsbee had earlier warned that the inflation figures pointed to a worsening situation, which “would make the Fed more aggressive.”

Expectations of higher interest rates were also reflected in the continued rise in US Treasury yields over the week. Supporting the Greenback, the US 10-year Treasury yield has advanced almost two basis points to 5.15%.

After touching a fresh 19-month peak of 103.42, the US Dollar Index (DXY) is trading 0.23% higher at 103.41. The index tracks the American currency against six other currencies.

According to CME FedWatch, market pricing indicates a nearly 90% probability of a 25-basis-point Fed rate increase in December, alongside a 10% probability of a 50-point hike.

Attention among Gold traders turns next week to the Federal Open Market Committee meeting minutes, Retail Sales figures and remarks from Fed officials.

XAU/USD technical outlook: Can Gold find support as losses deepen below $3,900?

Following the week’s fall, Gold seems to have established a bottom around $3,873, just above the day’s low of $3,867. Further downside nevertheless lies ahead. An extended sequence of lower highs and lower lows leaves the year-to-date trough of $3,852 open to a test. Below that level, the psychological $3,800 mark would come into focus, followed by $3,500, the swing high of 22 April 2025 that has since turned into support.

On the upside, $3,900 provides the initial resistance. Clearing this zone could pave the way towards Thursday’s intraday high of $4,000. Beyond that, $4,100 is the next level to watch, followed by the confluence of the 50-day Simple Moving Average (SMA) at $4,154 and the 100-day SMA at $4,196.