On Wednesday gold was still holding near $4,125, while according to Commerzbank it had fallen 0.6% to $4,141 the day before. In the Asian session on Thursday, sellers broke through $4,100 and are aiming lower. The metal has still not managed to consolidate above $4,200 — that's several attempts in a row now.
The main driver is rate futures. According to CME FedWatch (a tool that calculates the probabilities of Fed decisions from futures prices), the market is pricing in about 90% for a rate hike in December. The reason was US inflation data from last week and expensive energy: Brent at $109.55, and the US Strategic Petroleum Reserve had fallen to 282.7 million barrels by October 16 — the lowest since October 1982. The higher the rate, the more expensive it is to hold gold, which pays no coupons.
At the same time, the dollar touched a three-week low on Tuesday, and US Treasury yields were pulling back from multi-year highs. Usually that's fuel for gold — but this time it didn't work. Fed Chair Kevin Warsh gave no signal on October and said that higher inflation had not changed his view of the economy. The FXStreet Fed sentiment index remained at 127.51, i.e. still hawkish.
Geopolitics is also working against the metal. Iranian Foreign Minister Abbas Araghchi stated readiness for dialogue and for self-defense, while President Masoud Pezeshkian said there would be no negotiations under threats. But demand for protection is flowing into the dollar rather than gold, and that is cutting off rebounds.
Next on the calendar: on Thursday — weekly US jobless claims, on Friday — preliminary business activity indices, on October 27-28 — the Fed meeting, where the probability of holding the rate is estimated at 84%. The nearest support is $4,075-4,065 (the monthly low), then $4,030-4,025 and the round $4,000; resistance is $4,140 and $4,200.
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