FX.co ★ Der | XAU/USD, GOLD

Gold (XAU/USD) experienced a notable cumulative decline this week, approaching 4.50%. Although spot gold prices saw a slight recovery of 0.14% on Friday—closing near $1,879 and remaining on the verge of a 13-month low—the US dollar, which had previously been rallying, saw its gains temporarily tempered by the latest wholesale inflation data from the United States. Gold faced widespread selling pressure this week, as a series of US inflation reports reinforced market expectations that the Federal Reserve will continue to tighten monetary policy at its scheduled December meeting. Data released on Friday morning showed that the Producer Price Index (PPI) rose by 6.5% year-on-year in October; while this was slightly below the market expectation of 6.6%, it was faster than the 6.3% recorded in September—marking the largest annual increase since November 2022, driven primarily by rising transportation and warehousing costs. Meanwhile, the core PPI—which excludes volatile food and energy costs—rose by 5.0% year-on-year, remaining unchanged from the previous figure and in line with market forecasts. Coupled with the higher-than-expected Consumer Price Index (CPI) report for October released on Tuesday, these wholesale price figures have prompted a uniformly hawkish stance among Federal Reserve officials. Several officials have emphasized that current financial conditions are not sufficiently restrictive and that further interest rate hikes remain necessary. On Friday, San Francisco Federal Reserve President Mary Daly stated that further interest rate hikes are expected, as companies continue to pass higher input costs on to consumers. Meanwhile, Boston Federal Reserve President Susan Collins warned that the broad-based nature of inflationary pressures necessitates further monetary policy tightening. Earlier this week, Chicago Federal Reserve President Austan Goolsbee also cautioned that deteriorating inflation data might compel the Federal Reserve to adopt a more hawkish policy stance. Influenced by this hawkish consensus, the yield on the benchmark 10-year U.S. Treasury note rose by approximately two basis points to reach 5.15%. This not only increased the opportunity cost of holding non-interest-bearing assets—such as gold—but also provided a strong impetus for the U.S. dollar. Consequently, the U.S. Dollar Index (DXY) climbed 0.23% to trade around the 103.41 level, having earlier touched 103.42—its highest point in 19 months. Meanwhile, data from the CME FedWatch tool indicates that the market assigns a 90% probability to a 25-basis-point interest rate hike by the Federal Reserve in December, and a 10% probability to a 50-basis-point increase. Looking ahead to next week, gold traders will be closely monitoring the minutes from the Federal Open Market Committee (FOMC) meeting, U.S. retail sales data, and the latest remarks from Federal Reserve officials for further policy guidance. From a technical analysis perspective, gold prices have fallen decisively below the psychological $3,900 level, leaving the overall market structure heavily tilted in favor of sellers. Although spot prices appear to have temporarily stabilized around $3,873—slightly above Friday’s low of $3,867—the pattern of "lower highs and lower lows" suggests that downward pressure will persist. Bears are focused on testing the year-to-date low of $3,852, reached during Thursday’s sell-off. A break below this key support level on the daily chart would likely trigger further declines toward the $3,800 psychological mark, followed by a deeper historical support zone near $3,500—a level that previously served as a high on April 22, 2025, and now acts as support. Conversely, the $3,900 level currently serves as immediate resistance. Should bulls successfully reclaim this level, gold prices could see a corrective rebound, targeting the day’s high near $4,000. Breaking this level will lead to a test of the psychological level at $4,100, followed by a strong technical resistance zone formed by the 50-day simple moving average (at $4,154) and the 100-day simple moving average (at $4,196).