Gold slips 1% as US PCE data boost December rate-hike odds

Gold (XAU/USD) fell around 1.1% on Thursday, trading near $4,022 as the latest US Personal Consumption Expenditures (PCE) report reinforced market expectations of a Federal Reserve rate hike in December. The headline PCE price index rose 0.5% month-on-month in September, matching forecasts and pushing annual inflation to 3.6%, while the core PCE index, which excludes food and energy, increased 0.3% month-on-month, also in line with expectations, taking annual core inflation to 3.1%.

The Federal Open Market Committee voted 10-2 to keep the policy range at 3.75%-4.00% at its October meeting. Governor Lisa Cook and Cleveland Fed President Beth Hammack favored a 25-basis-point increase, and Fed Chair Kevin Warsh said the committee will continue to assess incoming data. > "While overall financial conditions are tighter, I’m unwilling and unable to call them tight," Warsh said.

Rabobank analysts noted that the Fed’s lack of forward guidance effectively left the door open for a December hike, and the CME FedWatch Tool indicated an 83% probability of an increase. The PCE data showed inflation still above the Fed’s 2% target, partly due to higher energy costs linked to Middle East tensions, while a preliminary third-quarter GDP estimate showed annualised growth of 3.4%, above expectations.

Despite a brief rally in the US dollar, the greenback eased toward 102.00 on the Dollar Index, and Treasury yields remained subdued. Gold failed to benefit from the softer dollar, as the prospect of further tightening weighed on the non-yielding metal.

Technical indicators show XAU/USD holding above the lower Bollinger Band but below the 20-day simple moving average at $4,112, with the relative strength index near 38, suggesting limited buying momentum. Resistance lies near $4,113 and $4,230, while support is around $3,995 to $4,000.