Gold slips as strong US inflation data bolsters dollar, Fed hike expectations

Gold prices slipped below $4,000 on Wednesday due to high US yields and odds of a December Fed rate hike. The Consumer Price Index (CPI) in the United States exceeded expectations, with inflation rising 0.4% month-over-month in October, above the 0.3% estimate. However, the focus was on core CPI, which stood at 0.3% month-over-month, surpassing the 0.2% estimate.

This prompted investors to anticipate a 25 basis point rate increase at the December meeting. The US 10-year Treasury yield climbed nearly 12 basis points to 5%, benefiting the Greenback. The US Dollar Index reached a yearly high of 102.90. Fed officials, such as Anna Paulson, Lorie Logan, Michelle Bowman, and Jeffrey Schmid, expressed hawkish sentiments, suggesting potential rate hikes to combat inflation.

Gold's price trended lower, touching its five-day low and showing a lower low for three consecutive days. The Relative Strength Index turned bearish, indicating bears are in control. Key support levels for gold are the November 4 low of $3,919 and the October 30 year-to-date low of $3,879. If gold breaks above $4,000, it could move towards the psychological $4,050 area and eventually $4,100.

Gold has historically been a safe-haven asset, often sought during turbulent times due to its inverse correlation with the US Dollar and risk assets.