Gold fell to its lowest level in almost a year on Friday as US inflation fears and Fed tightening expectations weighed on the metal. Traders now watch the October US producer price release.
Gold fell to 3,909 USD per ounce on Friday, its lowest level in almost a year. The metal is under pressure from fears of persistent US inflation and expectations of further interest rate hikes.
Iran comments and CPI feed rate fears
Donald Trump stated on Thursday that the US does not need an agreement with Iran, which reduces the chances of an early end to the conflict. Oil prices rose sharply after the comments, heightening fears of renewed inflationary pressure. For gold, higher energy prices increase the risk of tighter Fed policy, which reduces the appeal of the non-yielding metal.
The CPI released earlier in the week also came in stronger than expected, reinforcing expectations of a Fed rate hike in December. Christopher Waller acknowledged that, with core inflation remaining high, the Fed should consider a 50-basis-point rate hike. Markets now estimate the probability of such a move at around 14.5%, versus almost zero before Tuesday's inflation release.
PPI is the next test
The next key release is the US PPI. Headline PPI is expected to rise 6.6% year-on-year in October, with the core measure expected to increase by 5.0%. Strong figures could strengthen expectations of further policy tightening and put additional pressure on gold.
Demand for safe-haven assets is partially offsetting the negative impact of higher rates. However, the Fed's rhetoric remains hawkish, and some policymakers point to persistent inflationary pressures and the need to maintain a restrictive policy stance. That backdrop supports the dollar and remains a key obstacle to a sustained recovery in gold.
Sellers keep the technical edge
On the H4 chart, XAU/USD is trading around 3,899 USD, below resistance at 3,963 USD, after a reversal from 4,147 USD. The price fell to the 3,852 USD support area before a corrective rebound. A sequence of lower highs indicates that sellers retain the advantage.
The baseline scenario for 13 November envisages a retest of 3,852 USD. Consolidation below that level would open the way towards 3,777 USD, although reaching it in a single session is not guaranteed. An alternative scenario involves consolidation above 3,924 USD and a recovery towards 3,960 USD.
Source: ActionForex
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