Gold slips below $3,900 to lowest level in over a year as inflation concerns weigh ahead of US PPI data

• Near $3,880, gold trades sharply lower in early Asian dealing on Friday.
• Expectations of higher interest rates strengthened as inflation concerns persisted and Fed officials struck a hawkish tone.
• Friday’s focus turns to US PPI inflation figures for October.

With US inflation concerns persisting and higher interest rates expected, gold (XAU/USD) slides to around $3,880, its lowest level in more than a year, in Friday’s early Asian session. These pressures continue to weigh on the precious metal as traders await further guidance from the US Producer Price Index (PPI) report for October, due later on Friday.

Hopes of an agreement to end the conflict faded on Thursday after US President Donald Trump said the US did not need a deal with Iran. The news sent oil prices sharply higher, adding to concerns over inflation.

David Meger, director of metals trading at High Ridge Futures, said: "Higher energy prices continue to warrant a hawkish Fed, and a hawkish Fed is an environment of higher interest rates and hence a headwind for the yellow metal,"

Expectations of a December Fed rate increase have also been bolstered by this week’s stronger-than-forecast US Consumer Price Index (CPI) inflation figures. According to Fed Governor Christopher Waller, a 50-basis-point increase should be considered if core inflation stays elevated.

From zero before Tuesday’s inflation release, the market-implied probability of a 50-basis-point increase has risen to 14.5%.

October’s headline PPI is forecast to rise by 6.6% YoY, with the core measure expected to increase by 5.0% YoY over the same reporting period. Friday’s US release will therefore draw attention as traders seek further insight into inflation and the US central bank’s interest rate decision.

Gold advances as risk aversion outweighs flat credit and uneven bond performance

Despite noting that “credit was actually fairly flat on both sides of the Atlantic,” Deutsche Bank analysts say the risk-averse mood in equities resulted in “a good week for gold, which was up +5.06% (-0.42% Friday) in its best week since August.” In their assessment, “along with the risk-off tone from the AI selloff, that helped to bring down sovereign bond yields around the world.” Core rate movements have nevertheless varied, with Deutsche Bank observing that “the 10-year US Treasury yield is up +1bps at 4.87% and Brent down around a percent as I type.”

Dollar finds support as Daly strikes hawkish tone on AI-related inflation risks

At 8.3/10, Daly’s FXS Speechtracker reading stands clearly above the historical average of 6.5/10, reflecting a hawkish speech that repeatedly stresses persistent inflation and a preference for further tightening. Her central remarks present AI as a structural force behind productivity and possible future price pressures, rather than the principal cause of current inflation. They reinforce a picture of robust growth, steady labour markets and stubborn services inflation that continues to require restrictive policy. Her willingness to consider a September increase, alongside the assessment that “inflation pressure is up, not down”, points to a stance still tilted towards further rate rises, lending support to the Dollar against the Euro and Yen.

A 1.01-point increase takes the FXS Fed Sentiment Index to 147.55, leaving it firmly in hawkish territory and in line with the high FXS Speechtracker reading. The rise indicates that markets should read Daly’s remarks as strengthening expectations of tighter policy for longer, conditions that typically support the Dollar against its major counterparts.

Technical Analysis: Gold stays under pressure beneath the 100-day SMA

Trading below both the 100-day Simple Moving Average (SMA) and the middle Bollinger Bands (20) band, XAU/USD retains a bearish short-term bias on the daily chart. Spot prices sit just above support at the lower Bollinger band, indicating that selling pressure still dominates. Meanwhile, the Relative Strength Index (14) reads 37.64, below the neutral 50 threshold, signalling limited bullish conviction rather than outright oversold conditions.

The middle Bollinger band, near $4,038, provides the first upside hurdle. Beyond it lie the 100-day SMA at around $4,200 and a further technical ceiling at the upper Bollinger band of $4,205. Immediate downside support comes from the lower Bollinger band at $3,870; a sustained breach would leave scope for a deeper decline. A move back above the middle band, by contrast, would be required to temper the prevailing bearish bias.

(The technical analysis of this story was written with the help of an AI tool. Know more.)