Gold prices have dropped below the $4,000 mark as strong US economic data increases the likelihood of a Federal Reserve rate hike in December. The precious metal faced selling pressure after the US preliminary Q3 GDP report showed an annualized growth rate of 3.4%, surpassing estimates of 3.2% and the previous reading of 2.2%. This growth was driven by robust consumer spending and significant capital expenditure by hyperscalers.
The US core PCE Inflation, the Fed’s preferred gauge, rose by 3.1% year-on-year, matching expectations and accelerating from August’s 3%. On a monthly basis, it remained steady at 0.3%. The combination of strong economic growth and rising inflation has strengthened the case for monetary tightening, which typically weighs on non-yielding assets like gold.
Looking ahead, key triggers for gold include the upcoming US mid-term elections on November 4 and employment-related indicators, particularly the October Nonfarm Payrolls. Analysts at Commerzbank suggest the US is heading toward a 'divided government,' which could impact policy decisions and economic strategies. They note that President Trump has relied on executive orders for key policies, but legislative progress may slow if Congress opposes his agenda.
Technically, gold (XAU/USD) is trading at $3,992.40, maintaining a bearish near-term bias as it holds below the 20-day exponential moving average at $4,102.31. The metal has been retreating from the recent $4,300+ region, with rallies likely to be capped while the broader trend remains under pressure. The Relative Strength Index (RSI) at 35.87 indicates persistent selling interest without a clear exhaustion signal yet.