Gold rises above $4,100 despite Fed hike bets as oil sell-off weighs on USD

• With US Dollar weakness gathering pace, Gold climbs nearly 1% to trade above $4,100.
• December Fed rate rise probability hits 84% as WTI slides nearly 6%.
• A further 25.8 metric tons of Gold enters China's central bank reserves before  the US CPI release.

Last Friday’s strong US jobs figures prompted a modest hawkish reassessment, increasing market bets on a December interest rate rise by the Federal Reserve (Fed). Despite that shift, a weaker US Dollar lifts Gold (XAU/USD) by over 1.50% on Monday, taking the price above $4,130.

XAU/USD climbs as falling Oil pressures USD despite stronger Fed tightening expectations

A recovery in US equities points to renewed risk appetite, partly after US President Donald Trump described further strikes on Iran as “highly unlikely”. In response, US Oil benchmark West Texas Intermediate (WTI) fell nearly 6% to $85.00. Its positive correlation with the US Dollar meant the decline also pulled the currency lower.

Reports of renewed US-Iran nuclear negotiations were emerging at the time of writing. Citing sources, Al-Arabiya said a Qatar-Pakistani proposal would permit Iran to enrich uranium to 3.67%. Washington had reportedly agreed to the terms, while Tehran had accepted the proposal.

Further tightening began to be priced in following last Friday’s employment report, lifting the US 10-year Treasury yield two basis points to 4.889%. By contrast, the US Dollar Index (DXY), which measures the currency against its peers, has fallen 0.46% to 101.81.

A much stronger-than-expected Nonfarm Payrolls reading brought the Unemployment Rate down to 4.1% from 4.2%. According to the CME FedWatch Tool, the probability of a December rate rise now stands at 84%, compared with 76% last Friday.

Although higher interest rates typically weigh on non-yielding Gold, central bank purchases continue to underpin the metal. The World Gold Council reports that the People’s Bank of China (PBoC) increased its reserves by nearly 25.8 metric tons in October, its biggest monthly purchase in three years.

Comments from Federal Reserve (Fed) officials also drew attention. Thomas Barkin, President of the Richmond Fed, said there was no base case for December interest rates, adding that risks were concentrated on the inflation side of the mandate.

Chicago Fed President Austan Goolsbee had struck a hawkish tone earlier. He said services inflation was starting to “pick up,” had become a “big problem,” and that the Fed needed to acknowledge its failure on inflation.

Tuesday’s US Consumer Price Index (CPI) release is now in focus. Annual headline inflation is expected to increase to 3.9% in October from 3.7%, while the forecast for core CPI is a rise to 2.8% YoY from 2.6%.

XAU/USD technical outlook: Gold retreats after struggling at $4,100

Despite opening the week higher, Gold has yet to regain last Thursday’s $4,146 peak. The modest advance in price is accompanied by momentum pointing to further consolidation, as the Relative Strength Index (RSI) approaches the neutral 50 level.

A sustained bullish move requires XAU/USD to overcome the confluence of its 100- and 50-day Simple Moving Averages (SMAs), which stand at $4,191 and $4,201 respectively. Beyond those levels, attention would turn to the psychological $4,300 mark.

For sellers, a break below $4,100 would bring $4,000 into view. A further decline would put the November 4 daily low of $3,919 in focus, ahead of the October 30 year-to-date low of $3,879.