Gold prices fell 1.11% on Thursday, dropping to around $4,022 per ounce, as the latest US inflation data reinforced expectations of a Federal Reserve rate hike in December. The Personal Consumption Expenditures (PCE) Price Index rose 0.5% month-over-month in September, up from August’s 0.3% increase, while annual inflation climbed to 3.6% from 3.4%. The core PCE Index, excluding food and energy, also matched expectations with a 0.3% monthly increase and a 3.1% annual rise.
The Federal Open Market Committee (FOMC) kept interest rates unchanged at 3.75%-4.00% on Wednesday, with only two members favoring a 25-basis-point hike. Fed Chair Kevin Warsh emphasized the need for price stability but stopped short of declaring financial conditions as tight. Analysts at Rabobank noted that while the Fed left policy unchanged, the committee signaled a potential rate hike in December, citing the need for more data before making a decision.
The latest PCE data, combined with stronger-than-expected GDP growth of 3.4% in the third quarter, has increased the likelihood of a December rate hike to 83%, according to the CME FedWatch Tool. However, the US Dollar struggled to gain momentum, and Treasury yields remained subdued amid equity market volatility. Despite a weaker Dollar and lower yields, gold failed to benefit due to the prospect of further Fed tightening.
Technically, gold remains below its 20-day Simple Moving Average at $4,112, maintaining a bearish near-term bias. The Relative Strength Index (RSI) hovers around 38, indicating weak buying momentum, while the Moving Average Convergence Divergence (MACD) remains slightly negative. Key support levels include the lower Bollinger Band near $3,995 and the $4,000-$3,950 zone, with resistance at $4,113 and $4,230.