Gold falls to over one-year low below $3,900 amid inflation concerns, US PPI data looms

Gold price (XAU/USD) drops to a more-than-one-year low around $3,880 during the early Asian session on Friday. Persistent US inflation concerns and expectations of higher interest rates weigh on the precious metal. Traders will take more cues from the US October Producer Price Index (PPI) report later on Friday.

US President Donald Trump said on Thursday that the US did not need a deal with Iran, quashing hopes of a deal to end the conflict. Oil prices jumped after the news, fanning inflationary concerns.

"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," said David Meger, director of metals trading at High Ridge Futures.

Stronger-than-expected US Consumer Price Index (CPI) inflation data released earlier this week also have reinforced expectations of a Fed rate hike in December. Fed Governor Christopher Waller said that a 50-basis-point rate hike should be considered if core inflation remains elevated.

Markets now see a 14.5% chance of a 50-basis-point hike, up from zero before Tuesday’s inflation report.

Attention will shift to Friday’s US PPI report for further clues on inflation and the US central bank’s decision on interest rates. The headline PPI is expected to show a rise of 6.6% YoY in October, while the core PPI is projected to show an increase of 5.0% YoY during the same report period.

Gold shines as risk-off tone offsets steady credit and mixed bond moves

Analysts at Deutsche Bank note that “credit was actually fairly flat on both sides of the Atlantic,” but the prevailing risk-off tone in equities translated into “a good week for gold, which was up +5.06% (-0.42% Friday) in its best week since August.” They add that “along with the risk-off tone from the AI selloff, that helped to bring down sovereign bond yields around the world.” Even so, the move in core rates has been uneven, with Deutsche Bank highlighting that “the 10-year US Treasury yield is up +1bps at 4.87% and Brent down around a percent as I type.”

Daly leans hawkish on inflation risks from AI, supporting Dollar upside

Daly’s speech scores 8.3/10 on the FXS Speechtracker, a clear hawkish tilt relative to the historical average of 6.5/10, with repeated emphasis on persistent inflation and a bias toward further tightening. The key remarks frame AI as a structural driver of productivity and potential future price pressures, but not the main culprit behind current inflation, reinforcing a narrative of solid growth, stable labor markets, and sticky services inflation that still demands policy restraint. Comfort with a September hike and the view that “inflation pressure is up, not down” underscore a policy stance that remains skewed toward additional rate increases, supportive for the Dollar versus the Euro and Yen.

The FXS Fed Sentiment Index rises by 1.01 points to 147.55, firmly in hawkish territory and consistent with the elevated FXS Speechtracker score. This move signals that markets should interpret Daly’s comments as reinforcing tighter-for-longer expectations, a backdrop that typically underpins the Dollar against major peers.

Technical Analysis: Gold retains a negative outlook below the 100-day SMA

In the daily chart, XAU/USD maintains a bearish near-term bias as spot holds beneath the 100-day Simple Moving Average (SMA) and the Bollinger Bands (20) middle band. Price is hovering just above the lower Bollinger band support, suggesting downside pressure remains dominant, while the Relative Strength Index (14) at 37.64 stays below the neutral 50 line, hinting at weak bullish conviction rather than outright oversold conditions.

On the topside, initial resistance is located at the Bollinger Bands middle band near $4,038, followed by the 100-day SMA around $4,200, with the Bollinger upper band at $4,205 acting as a higher technical cap. On the downside, immediate support is aligned with the lower Bollinger band at $3,870, and a sustained break below this zone would open the door for a deeper retreat, while recovery above the mid-band would be needed to ease the current bearish tone.