Gold slips under $4,000 as rate bets raise $3,900 risk

COMEX gold futures fell $30.90 to $3,999.90 an ounce on Wednesday, breaking below $4,000 after hotter-than-expected U.S. inflation and hawkish Federal Reserve comments lifted the dollar and reinforced expectations for more tightening, while analysts warned the slide could extend toward $3,900.

For traders, the breach puts a major round-number support under pressure a day after COMEX gold dropped $84.20, or 2.05%, and TD Securities told Kitco that higher rates and a stronger dollar were weighing on investment demand and could force a retest of support near $3,900.

The break below $4,000 draws focus

COMEX gold futures were at $4,001.40 at 17:57 UTC after touching $4,010.50 at 17:35 UTC, according to GoldSquawk data, before Bloomberg reported at 18:02 UTC that gold had fallen nearly 1% to $3,992.43 an ounce.

By 21:23 UTC, Kitco said spot gold was at $3,987 an ounce, down more than 1% on the day, as analysts flagged the risk of further losses if selling continued.

The move left futures below Wednesday’s close of $3,999.90 and extended the retreat from Monday’s settlement at $4,115.00 an ounce, according to GoldSquawk settlement figures.

Hot CPI and Fed expectations stay in control

Reuters said gold fell on Wednesday after U.S. October CPI rose 0.4% against a 0.3% forecast in a Reuters poll, a result that Bob Haberkorn of StoneX said supported the case for higher rates at the December meeting.

Kitco said TD Securities saw markets pricing at least a 25 basis-point Fed increase next month and nearly 75 basis points of additional tightening overall, while the CME FedWatch Tool showed a 13.2% chance of a 50 basis-point move.

Bark Melek of TD Securities told Kitco he expects gold to retest support near $3,900, and FOREX.com market analyst Fawad Razaqzada said gold’s failure to hold its rebound pointed to increasing technical weakness, with $3,942 to $4,000 as key support and $3,870 as the first major downside target.

Positioning and demand offer limited support

The positioning backdrop has also softened. The CFTC said the COMEX gold speculative net position fell to 179.5K contracts in the week to Nov. 3, down 6.9K from the prior week and marking an eighth straight decline.

The World Gold Council said total gold demand in the third quarter was 1,369 tonnes, 1% lower from a year earlier, while Louise Street said higher rates and mixed inflation expectations were a headwind into year-end even as physically backed gold ETFs added 211 tonnes in the quarter.

World Gold Council figures also showed investment demand of 479.0 tonnes in Q3, down 14% from a year earlier.

Traders will now be watching whether the $3,942-to-$4,000 support area identified by Razaqzada gives way decisively before U.S. producer-price figures on Nov. 13, with Forex Factory consensus at 0.3% month on month for core PPI and 0.4% for headline PPI.

Later on Nov. 11, COMEX gold futures fell to $3,985.10 at 23:34 UTC and were last at $3,987.20 at 23:40 UTC, according to GoldSquawk data.