Gold hits one-year low near $3,850 as Fed hawks drive sharp sell-off

• Gold slumps to $3,874, having hit a new yearly low at $3,852.
• Calls for further tightening from Fed officials push the US Dollar towards 19-month highs.
• For December, Fed 25 bps rate-hike probability hits 87% ahead of US PPI.

Selling pressure drove Gold (XAU/USD) nearly 2.8% lower on Thursday, with traders assigning a greater probability to a 50 bps December rate increase by the Federal Reserve (Fed). After hitting a yearly low at $3,852, XAU/USD is trading at $3,874.

How are hawkish Fed comments and rising Oil prices shaping markets?

A growing hawkish tilt among Fed officials is lending support to the Greenback, keeping bullion prices under pressure.

While backing a gradual approach to interest-rate increases, the Cleveland Fed's Beth Hammack warned that the inflation outlook is deteriorating. Inflation has been “well above target,” according to the Chicago Fed's Austan Goolsbee. Meanwhile, the San Francisco Fed's Mary Daly acknowledged the need for additional tightening, saying inflation pressure “is up, not down.”

Initial Jobless Claims for the week ending 7 November increased by 200K, against estimates of 195K and the previous reading of 191K, leaving US jobs data slightly weaker than anticipated. Nevertheless, a fall in Continuing Jobless Claims to 1.697 million from 1.717 million points to a labour market that remains solid.

Separately, Existing Home Sales recorded a -5.5% change relative to September’s reading, falling to 3.75 million from 3.97 million.

Near 19-month highs, the US Dollar Index (DXY) has gained 0.34% to 103.48. The index measures the Greenback against a basket of six currencies.

Meanwhile, a social media post by US President Donald Trump stated that the US does not need a deal with Iran, keeping further strikes on the table. This contradicted his remarks two days earlier that new strikes were unnecessary.

A 2.7% advance took West Texas Intermediate (WTI), the US crude oil benchmark, to $88.79 per barrel. The rise fuelled speculation about higher petrol prices and increased the likelihood of a Federal Reserve rate hike.

According to the CME FedWatch Tool, money markets had assigned an 85% probability to a 25-basis-point increase in December, with a smaller 15% probability of a 50-basis-point hike. Only a week earlier, markets had priced in zero chance of a 50 bps increase.

Friday’s US economic calendar includes the release of October Producer Price Index (PPI) figures.

XAU/USD technical outlook: Can Gold recover after falling over 2.5% below $3,900?

A partial recovery from the year-to-date (YTD) low of $3,852 has still left Gold trading below $3,900. Both price action and momentum, gauged by the Relative Strength Index (RSI), point to further losses.

At $3,852, XAU/USD faces its initial support, with $3,800 next if that level gives way. Key psychological levels follow below, while the next area of interest lies at $3,500, the swing high of 22 April 2025 that has since become support.

On the upside, $3,900 marks the first major resistance, before the day’s high of $4,000. A stronger recovery would bring $4,100 into focus, followed by the confluence of the 50-day Simple Moving Average (SMA) at $4,165 and the 100-day SMA at $4,199.