Gold faces sharp weekly losses as elevated US yields bolster bets on a Fed rate hike

• A modest advance on Friday leaves Gold on course for a 4.50% weekly loss.
• US 10-year Treasury yields climb to 5.15% while the US Dollar reaches its highest level in 19 months.
• Elevated US inflation readings push the probability of a December Fed rate rise towards 90%.

A hot US producer inflation report has left Gold (XAU/USD) on course for a weekly loss of nearly 4.50%. On Friday, however, the metal is 0.14% higher as the US Dollar (USD) limits its advance. XAU/USD stands at $3,879 at the time of writing, close to its lowest level in 13 months.

Gold tumbles nearly 4.5% as US inflation reinforces the case for a Fed rate rise

October’s Producer Price Index (PPI), released earlier, showed US headline producer prices rising 6.5% YoY. Although below forecasts, the reading exceeded September’s 6.3%, driven largely by higher transport and warehousing prices. Excluding items such as food and energy, core PPI held at 5%, unchanged from the previous month and matching estimates. Taken together, this week’s US inflation figures have made a December interest rate increase by the Federal Reserve (Fed) more likely.

Alongside Tuesday’s US Consumer Price Index (CPI) release, these figures drew responses from most Fed officials. Many of those speaking this week anticipated higher interest rates and observed that financial conditions were not restrictive.

Further rate rises are needed as firms seek to pass on higher costs, San Francisco Fed Mary Daly said on Friday. Boston Fed Susan Collins, meanwhile, warned that inflation was spreading and warranted additional increases. Earlier, Chicago Fed Austan Goolsbee said the inflation figures pointed to a worsening situation, which “would make the Fed more aggressive.”

The continued rise in US Treasury yields over the week signals expectations among market participants for higher interest rates. With the US 10-year Treasury yield almost two basis points higher at 5.15%, the Greenback has received support.

After setting a fresh 19-month peak of 103.42, the US Dollar Index (DXY) stands 0.23% higher at 103.41. The index tracks the American currency against a basket of six other currencies.

According to CME FedWatch, markets assigned a nearly 90% probability to a 25-basis-point Fed rate increase in December, alongside a 10% probability of a 50-point rise.

For Gold traders, next week’s focus will be the Federal Open Market Committee meeting minutes, Retail Sales figures and speeches from Fed officials.

XAU/USD technical outlook: Gold deepens its decline below $3,900

Following the weekly sell-off, Gold seems to have found a bottom around $3,873, just above the day’s $3,867 low. Further losses nevertheless lie ahead. An extended sequence of lower highs and lower lows leaves the year-to-date trough of $3,852 open to a test. Below that level, the psychological $3,800 mark comes into view, followed by $3,500, the swing high from 22 April 2025 that has since become support.

Initial resistance, by contrast, stands at $3,900. A break above this area could bring Thursday’s intraday high of $4,000 into reach. Beyond that lies $4,100, followed by the confluence of the 50-day Simple Moving Average (SMA) at $4,154 and the 100-day SMA at $4,196.