Gold drops sharply as expectations for a Fed rate cut in December continue to cool

Gold surrendered more than 3% on Friday, following hawkish comments from Fed officials that further dampened expectations for a December rate cut, pushing probabilities below 50% after they had been above 80% on Thursday and over 90% just days earlier.

FOMC members cited rising inflation concerns and a relatively stable labor market as justification for their stance, despite the fact that key delayed economic reports have yet to be released.

The sharp break below several key support levels undermined hopes for a healthy correction, with dips expected to find footing around the broken 50% Fibo and the previous upper bull-channel boundary at $4,134, souring market sentiment.

Near-term focus shifted lower after Friday’s retracement from Thursday’s peak at $4,245, which erased nearly 61.8% of the $3,886–$4,245 rally, dragging prices to a session low of $4,032 and testing the psychological $4,000 support (also the lower bull-channel boundary).

However, the potential for a recovery remains, supported by a quick bounce and still bullish-aligned daily studies, including positive momentum and moving averages in a bullish configuration, with the 10/20DMA convergence set to form a bull cross.

A return and daily close above the $4,100 zone is seen as the minimum requirement to maintain hopes for a recovery, while a sustained move above the bull-channel upper boundary at $4,131 would validate a fresh bullish signal.

Gold’s near-term trajectory will hinge on upcoming U.S. economic data, which will guide the Fed’s stance on interest rates.

Res: 4100; 4108; 4131; 4160; 4200
Sup: 4065; 4032; 4038; 4023; 4000