Key Points:
- Gold tumbles 3% intraday as Fed officials reject rate cut bets, sending futures into a high-volume sell-off.
- Spot gold finishes at $4,085.82, still up 2.11% on the week despite aggressive selling sparked by hawkish Fed tone.
- CME FedWatch shows December cut odds fall to 46% from 50%, pressuring gold and broader risk assets
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Gold Price Drops as Fed Officials Push Back on Rate Cut Bets
Spot Gold (XAUUSD) tumbled on Friday, shedding more than 3% intraday, as hawkish Federal Reserve remarks triggered a sharp risk-off reaction across global markets. Despite the late-week reversal, bullion managed to post a 2.11% gain for the week, supported by earlier strength tied to rate cut speculation.
Spot gold settled at $4,085.82, down 2.6% on the day after falling more than 3% at the session low. The sell-off came as traders pared back bets on a December Fed rate cut, following remarks from policymakers signaling caution on further easing.
Fed Messaging Erodes Rate Cut Odds
Federal Reserve officials leaned hawkish throughout the week, with Kansas City Fed President Jeffrey Schmid stating inflation remains too elevated. That tone helped drag the CME FedWatch Tool’s implied probability for a December 25-basis-point rate cut down to 46%, from 50% earlier in the week. The repricing caught gold bulls off guard and triggered a wave of broad asset liquidation.
The market reaction wasn’t limited to metals. Equities and bonds also sold off as rising yields pushed investors to exit risk assets. In this kind of forced liquidation, even gold, typically a safe haven, came under pressure as traders scrambled to raise cash and meet margin calls.
Data Vacuum Keeps Traders Guessing
Traders were also left flying blind due to missing government data, a ripple effect from the recently resolved U.S. government shutdown. October’s CPI, PPI, and nonfarm payrolls were not published, and the White House confirmed some reports may never be released. Without hard economic data, markets have been forced to rely heavily on Fed commentary and sentiment.
That uncertainty has kept both the Fed and investors in a holding pattern, with futures markets struggling to price the next policy move with confidence.
Rising Yields Add to Gold’s Headwinds
U.S. Treasury yields moved higher across the curve. The 10-year closed at 4.148%, while the 2-year rose to 3.61% and the 30-year ended at 4.749%. With real yields firming and rate cut odds fading, the opportunity cost of holding non-yielding gold increased, pressuring the metal further.
Physical gold demand in Asia was also muted, offering no cushion during Friday’s sharp drop. That lack of retail support left futures more vulnerable to momentum-driven selling.
