$4,000 approaches as gold plunges and hot US inflation pushes Treasury yields above 5%

• $4,146 daily high gives way to a sharp Gold sell-off.
• 0.3% MoM rise in US Core CPI strengthens expectations for additional Fed tightening.
• 12-basis-point jump takes US 10-year Treasury yields to 5.012%.

$4,021 is the latest price for Gold (XAU/USD). The metal is down nearly 3% after reaching a peak near $4,146. Tuesday’s North American session saw a sharp sell-off as Federal Reserve (Fed) officials adopted a hawkish stance, anticipating further tightening after a hot United States (US) inflation report.

Nearly 3% Gold decline follows sticky US inflation and hawkish Fed comments

A 0.4% MoM increase in the US Consumer Price Index (CPI) for October exceeded the 0.3% forecast, although it slowed from 0.6%. Excluding volatile items, Core CPI advanced 0.3% MoM. That matched September’s reading and surpassed expectations of 0.2%. The core measure, generally a clearer gauge of inflation, indicated that disinflation was stalling.

Before the release, Fed Governor Christopher Waller had indicated support for a 25-basis-point hike if core CPI pointed to improving inflation. A 0.3% reading, however, would lead him to favour a 50-basis-point increase. He added: “Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take.”

Some of Waller’s remarks were echoed by Dallas Fed President Lorie Logan, who said that “more rapid rate hikes possibly needed this winter,” and added that the Fed remained 50 basis points short of a “modestly restrictive level.”

According to the CME FedWatch Tool, money markets assign a 10% probability to a 50-basis-point rate hike in December. A 25-basis-point increase is fully priced in.

Against this backdrop, a nearly 0.70% advance took the US Dollar Index (DXY) to 102.36 as bullion slumped. The index measures the US currency against six currencies. US Treasury yields also climbed, with the 10-year T-note yield jumping 12 basis points to 5.012% as investors became increasingly confident of a December Fed rate hike.

Oil prices, by contrast, are largely flat. Speculation is growing that Washington and Tehran could reach a ceasefire agreement that may end the conflict, which began towards the end of February.

Following the US Veterans Day holiday, the economic calendar picks up on Thursday. Traders will focus on jobless claims, housing figures and addresses by Fed officials.

$4,000 in focus as Gold slides: XAU/USD technical outlook points to further losses

A four-day low of $4,015 marks Gold’s slide against the fundamental backdrop, with sellers targeting a decisive break beneath the psychological $4,000 threshold. The Relative Strength Index (RSI) signals a bearish shift in momentum, pointing to additional losses ahead.

A fall below $4,000 is required to extend Gold’s bearish trend. Such a break would make a move towards the November 4 daily low of $3,919 likely, with the October 30 year-to-date low of $3,870 next in view.

Alternatively, a recovery above $4,050 by Gold buyers would bring $4,100 into focus. Clearing that level would allow a further rebound towards the next major resistance zone, where the 50- and 100-day Simple Moving Averages (SMAs) converge at $4,185 and $4,200, respectively.