US PCE data bolsters December Fed hike odds as gold retreats towards $4,000

• Friday’s early Asian trading sees Gold slide towards $4,015.
• September brought an acceleration in US PCE inflation.
• A December Fed interest rate increase carries a 74.9% probability in traders’ pricing.

An acceleration in US inflation has strengthened expectations of a Federal Reserve (Fed) interest rate increase later this year, weighing on Gold. The precious metal (XAU/USD) retreats to around $4,015 in Friday’s early Asian session.

September’s US Personal Consumption Expenditures (PCE) Price Index rose 0.5%, compared with August’s 0.3% increase, according to figures released on Thursday by the Commerce Department’s Bureau of Economic Analysis. The reading matched market forecasts.

David Meger, director of metals trading at High Ridge Futures, said: “A stubbornly high inflationary outlook that continues to run hotter than Fed targets is paving the way for thoughts that the Fed will raise rates at the December meeting. That’s ... the main drag on the gold market right now, and today’s ‌PCE report did nothing to allay that fear,”

At Wednesday’s October policy meeting, the Federal Open Market Committee (FOMC) held interest rates in the 3.75% to 4% range. Although Fed Chair Kevin Warsh gave no guidance on the outlook, he acknowledged that price stability had yet to be achieved. Warsh said: "We're working on it,"

According to the CME FedWatch tool, market pricing now implies roughly a 74.9% probability of a US rate increase in December. Holding non-yielding gold becomes more costly in opportunity-cost terms when interest rates rise.

Gold holds up as industrial precious metals come under pressure

Following the latest FOMC meeting, TD Securities observes that "industrial metals struggle", whereas gold retains relative strength. In the bank’s assessment, "while gold remains fairly resilient post-FOMC, industrial precious metals are skewing to the downside, with silver and PGMs materially underperforming as macro headwinds and the prospect of tightening policy weigh on demand outlooks." Investors’ preference for gold over precious metals with greater cyclical exposure highlights a more defensive mood across the sector.

Warsh reinforces 2% price stability commitment as Dollar bulls stay watchful

Continuity, rather than a change of policy regime, characterises Warsh’s firmly hawkish press conference: the 7/10 FXS Speechtracker score matches the established baseline. His insistence that “ensuring price stability is not about a fixed date on a calendar” indicates an approach guided by data and outcomes. It also underlines the commitment to fully “quashing inflation”, even as the Fed says its “new monetary medicine” and September’s withdrawal of accommodation are starting to take effect. Alongside repeated confidence that inflation expectations are “going the right way,” the firm 2% PCE target and “no ifs and or buts” commitment to price stability suggest the Fed is not yet considering an early policy pivot. Such a backdrop typically favours the Dollar against the Euro and Yen.

A +14.39-point rise takes the FXS Fed Sentiment Index to 141.89, signalling a clear strengthening of the hawkish message. The gauge moves further above its 100 neutral line, confirming that this communication is more restrictive than recent Fed messaging. Taken together, the elevated index and unchanged 7/10 FXS Speechtracker score indicate to FX markets that policy remains tilted towards keeping financial conditions tighter, a setting that tends to support the Dollar against its major counterparts.

Technical Analysis: Gold remains under pressure below the 100-day SMA

With spot trading beneath both the 100-day simple moving average (SMA) and the middle Bollinger band, the daily XAU/USD chart retains a bearish near-term outlook. The price sits only just above the lower Bollinger band. Meanwhile, the Relative Strength Index (RSI), at 38.23, remains in bearish territory without reaching oversold levels, suggesting continued downward pressure rather than capitulation.

The lower Bollinger band, around $3,995, provides immediate downside support and may prompt sellers to pause. Any advance would first encounter resistance near $4,115 at the middle Bollinger band, then at the 100-day SMA of $4,215 and the upper Bollinger band of $4,230. A recovery of these levels would be needed to temper the prevailing bearish outlook and pave the way for a more durable rebound.

(The technical analysis of this story was written with the help of an AI tool. Know more.)