Gold Slides Nearly 4% as Fed Turn Lifts Rate-Hike Bets to 89%

Gold is down close to 4% for the week after losing the psychologically key $4,000 per ounce level — and the Federal Reserve is the reason, according to Ion Jauregui, analyst at ActivTrades.

The metal hit lows of more than a week on Thursday. By Friday it was trying to claw back toward $3,900, but the recovery remained fragile. Selling pressure intensified after the latest US inflation print and a hardening of Fed rhetoric.

The numbers behind the move are specific. US inflation for October came in at a monthly increase of 0.4%, beating the 0.3% forecast. Markets responded fast, pricing an approximately 89% probability of a 25-basis-point rate hike in December. Bets on an even larger move also grew.

Why is the Fed such a problem for gold?

Two mechanisms are at work, Jauregui notes. Higher rates raise the opportunity cost of holding an asset that pays no yield. And a stronger dollar makes gold more expensive for international buyers.

The tone of Kevin Warsh at the head of the Fed, plus warnings from several regional Fed officials, reinforce the prospect of more restrictive monetary policy ahead. The takeaway: monetary pressure, not safe-haven demand, is setting gold's price right now.

What do the technicals show?

The daily chart carries a bearish bias. Gold trades below its 50-, 100- and 200-session exponential moving averages, which sit at $4,146, $4,196 and $4,432 respectively. The RSI stands at 38.6 points — low enough to leave room for further declines. The MACD remains in negative territory.

The key levels on the chart:

• Immediate support: $3,871. A break of it would expose $3,657 and then $3,500.
• Resistance levels: $3,959, $4,066 and $4,203 on the upside.

Watch $3,871 first. That's the line separating a shallow dip from a deeper slide toward $3,657.

Can safe-haven demand rescue the price?

Not so far. Neither geopolitical uncertainty nor gold's safe-haven status has offset monetary pressure, Jauregui writes. US real bond yields are once again dominating the market.

The medium-term picture isn't solely in the Fed's hands, though. Central bank demand, reserve diversification and fiscal uncertainty remain structural factors that could limit how far the correction runs.

What would signal a turn?

ActivTrades frames the conclusion bluntly: gold faces a change of scenario in which monetary policy once again prevails over its demand as a safe haven. As long as rate-hike expectations persist and the dollar retains its strength, rebounds will struggle to consolidate.

The first sign of stabilization would be a recovery of $4,066. Even that, Jauregui cautions, would not yet confirm a change of trend.

ActivTrades notes the material is a marketing communication, not investment research, and does not constitute an offer or solicitation for any transaction.