Gold falls to new year-to-date low as Fed rate-hike expectations boost dollar
Gold slipped to around $3,853, a fresh year-to-date low, while the dollar rose to its highest level since April 2025 amid stronger expectations of Federal Reserve rate hikes.
Gold (XAU/USD) fell to a new year-to-date low on Thursday, trading near $3,853, down more than 3% on the day, as market participants priced in more aggressive Federal Reserve rate hikes and the U.S. dollar strengthened. The dollar index hovered around 103.10, its highest level since April 2025.
The decline in gold coincided with a drop in U.S. equities after reports that Nvidia CEO Jensen Huang had resigned, prompting some investors to sell gold to cover losses elsewhere.
Cleveland Fed President Beth Hammack said policy needs to become restrictive and noted that higher energy costs are feeding through to other prices. She added that smaller moves are less disruptive, though a larger hike could be required if the Fed falls behind.
Fed Governor Christopher Waller indicated a 50-basis-point hike in December could be on the table if the October core CPI came in around 0.3% or higher. Core CPI rose 0.3% month-over-month, above the 0.2% forecast, while headline CPI increased 0.4%, beating the 0.3% estimate.
Analysts at MUFG/BTMU noted that about 28 basis points of hikes are priced in by December and 43 basis points by the January meeting, suggesting that even a 25-basis-point hike in December could be quickly followed by another 25-basis-point move at the start of next year.
ING strategists said the combination of hawkish Fed commentary and the CPI beat continues to support the dollar, with real front-end rate differentials fueling strong dollar momentum. They described the move as rates-driven, with limited excess dollar strength relative to short-term fair value built in.
Higher borrowing costs are reducing gold's appeal as investors shift to interest-bearing assets. Traders now await the Producer Price Index data due on Friday, and several Fed officials are scheduled to speak later in the week.
U.S. President Donald Trump wrote on Truth Social, "We don’t need a deal with Iran. Those days have long since passed," adding a geopolitical dimension that could affect oil prices and inflation.
Technical analysis shows gold trading below its lower Bollinger Band, with the band acting as immediate resistance near $3,865. The Relative Strength Index sits at 36, below the neutral 50 level, while the MACD has turned slightly negative, indicating bearish momentum. Support is near $3,850, with a break potentially targeting $3,800.