High US yields boost Fed rate hike bets, leaving gold facing weekly rout

4.50% weekly loss looms for Gold despite a small Friday advance.
5.15% reached by US 10-year Treasury yields while the US Dollar climbs to 19-month highs.
Nearly 90% odds of a December Fed hike follow strong US inflation figures.

Nearly 4.50% is Gold’s expected loss for the week. On Friday, however, Gold (XAU/USD) is 0.14% higher as the US Dollar (USD) limits its gains after a strong US producer inflation report. XAU/USD stands at $3,879 at the time of writing, close to 13-month lows.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Nearly 4.5% slide in Gold as US inflation strengthens the Fed’s rate-hike case

A December interest rate increase by the Federal Reserve (Fed) has become more likely following this week’s US inflation releases. October’s Producer Price Index (PPI), published earlier, put headline annual inflation at 6.5%. Although below forecasts, the reading exceeded September’s 6.3%, driven largely by increased transportation and warehousing prices. Excluding items such as food and energy, core PPI held at 5%, unchanged from the previous month and matching estimates.

Together with Tuesday’s US Consumer Price Index (CPI) release, these figures drew responses from most Fed officials. Many of this week’s speakers anticipated higher interest rates and said financial conditions were not restrictive.

Further rate increases are needed as companies seek to pass on higher costs, San Francisco Fed’s Mary Daly said on Friday. Boston Fed’s Susan Collins also cautioned that broadening inflation justified additional hikes. Chicago Fed’s Austan Goolsbee had earlier warned that the inflation figures pointed to a deteriorating situation, which “would make the Fed more aggressive.”

Expectations of higher interest rates were reflected in US Treasury yields, which kept climbing over the week. At 5.15%, the US 10-year Treasury yield is almost two basis points higher, lending support to the US Dollar.

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

According to CME FedWatch, markets assigned almost 90% probability to a 25-basis-point Fed increase in December and 10% probability to a 50-point rise.

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

Below $3,900: Gold losses deepen in XAU/USD technical outlook

Following the weekly sell-off, a Gold bottom appears to have formed around $3,873, just above the day’s $3,867 low. Further declines nevertheless lie ahead. Successive lower highs and lower lows remain intact, bringing the year-to-date trough of $3,852 into focus for a test. A break below that level would open the way to psychological support at $3,800. Beyond that lies $3,500, the swing high recorded on 22 April 2025 that has since become support.

On the upside, $3,900 marks the initial resistance. Clearing this zone could take Gold towards Thursday’s intraday high of $4,000. The next level is $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.

Gold: frequently asked questions

What attracts investors to Gold?

As both a store of value and a medium of exchange, Gold has held an important place throughout human history. Today, its appeal extends beyond its lustre and use in jewellery. The precious metal is widely regarded as a safe-haven asset, or a sound investment during periods of turbulence. Because it is not dependent on a particular issuer or government, Gold is also commonly viewed as a hedge against inflation and currency depreciation.

Which buyers hold the most Gold?

The largest Gold holdings belong to central banks. To underpin their currencies during unsettled periods, they typically diversify reserves and purchase Gold, reinforcing perceptions of economic and currency strength. Substantial Gold reserves can bolster confidence in a country’s ability to meet its financial obligations. World Gold Council data show that central banks increased their reserves by 1,136 tonnes in 2022, worth around $70 billion. That was the largest annual purchase on record. Emerging-market central banks, including those in China, India and Turkey, are rapidly expanding their Gold reserves.

How does Gold move relative to other assets?

Both the US Dollar and US Treasuries are major reserve and safe-haven assets, and Gold tends to move inversely to them. A weaker Dollar generally supports Gold, allowing investors and central banks to diversify their holdings during turbulent periods. Gold also has an inverse relationship with risk assets: rising equity markets typically put pressure on its price, whereas selling in riskier markets generally benefits the precious metal.

Which factors drive Gold prices?

Numerous factors influence Gold prices. Its safe-haven appeal means geopolitical instability or concerns over a deep recession can trigger rapid gains. Gold pays no yield, so lower interest rates generally support it, while higher borrowing costs usually weigh on the metal. Most price movements, however, hinge on the performance of the US Dollar (USD), since Gold is quoted in dollars (XAU/USD). Dollar strength tends to restrain Gold prices; a weaker Dollar is more likely to lift them.