Gold Surrenders Weekly Gains Amid Rising December Rate Hike Bets

Traders' Opinions

Summary:

Gold retreats below $4,000, trading around $3,952 as stronger US inflation data and expectations of further Fed tightening boost the Dollar. A potential US-Iran diplomatic breakthrough could, however, ease inflation concerns and support bullion.

SELL XAUUSD

EXP

TRADING

3947.00

Entry Price

3800.00

4150.00

3854.66 -133.21 -3.34%

0.0

Pips

Flat

3800.00

Exit Price

3947.00

Entry Price

4150.00

Gold (XAU/USD) has come under renewed selling pressure, slipping below the $4,000 psychological level on Thursday and surrendering most of last week's gains. The metal dropped to an intraday low of $3,924 before recovering towards $3,952, although it remains down approximately 0.82% on the day. The primary pressure comes from a strengthening US Dollar, which has benefited from growing expectations of more aggressive Federal Reserve interest rate increases.

The latest US inflation figures have reinforced this outlook. October core Consumer Price Index (CPI) increased by 0.3% month-on-month, exceeding the 0.2% forecast, while headline inflation rose 0.4% against expectations of 0.3%. The figures have strengthened the argument for additional monetary tightening, particularly after Fed Governor Christopher Waller previously suggested that a 50-basis-point increase could be necessary if core inflation reached 0.3% or higher.

Interest rate expectations have consequently shifted higher. MUFG analysts estimate that markets are pricing approximately 28 basis points of tightening by December and 43 basis points by the following January meeting. This suggests investors are increasingly anticipating consecutive rate increases rather than a single adjustment.

The Dollar has benefited from this repricing, with the US Dollar Index (DXY) reaching 103.08, its highest level of the year, before retreating towards 102.88. ING strategists attribute the Greenback's strength to hawkish Fed commentary and stronger inflation data, highlighting rising short-term real interest rate differentials as an important driver.

For Gold, the implications are largely negative. Higher interest rates increase the opportunity cost of holding non-yielding assets, encouraging investors to favour interest-bearing alternatives. This has made it increasingly difficult for bullion to sustain its recent recovery, particularly as Dollar strength adds another layer of pressure.

Attention is now shifting towards upcoming US economic releases, including weekly jobless claims and Friday's Producer Price Index (PPI). Further hawkish signals from Fed officials could reinforce expectations of additional tightening, potentially extending the pressure on Gold.

However, geopolitical developments could introduce a different dynamic. Reports from The Wall Street Journal indicate that US Vice President JD Vance is considering direct discussions with senior Iranian security official Mohsen Rezaei, although negotiations remain preliminary. Any progress towards a diplomatic agreement could put additional pressure on crude oil prices. A sustained decline in energy costs could eventually ease inflation concerns and reduce expectations for aggressive Fed tightening, offering some support to Gold.

Technical Analysis

Gold remains under significant selling pressure, with price falling towards $3,947 after failing to sustain its recovery towards the $4,100–$4,135 resistance region. The recent price action suggests that sellers have regained control, with the market now approaching an important support area that could determine the next directional move.

The $3,965–$3,980 region represents the immediate resistance zone. This area previously provided support during the November recovery but has now been breached, potentially turning into resistance. A corrective rebound towards this region could attract renewed selling interest, particularly if buyers fail to reclaim it convincingly.

The broader H4 structure also favours further downside. Gold has established lower highs following its rejection around $4,135, while the latest bearish move suggests that the previous recovery was corrective rather than the beginning of a sustained bullish reversal.

On the downside, $3,880 represents the first important support target. A decisive break below this level could expose $3,800, followed by the deeper downside region around $3,665. These levels could attract buying interest, although sustained bearish momentum would increase the likelihood of an extended correction.

My preferred scenario is a modest recovery towards $3,965–$3,980 before sellers attempt to resume the decline. However, a sustained move back above $4,000 would weaken the immediate bearish outlook.

TRADE RECOMMENDATION

SELL XAU/USD

ENTRY PRICE: 3,947

STOP LOSS: 4150

TAKE PROFIT: 3,800

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