Gold tumbles nearly 3% to yearly lows as risk-off mood offers little support
- Gold falls to its lowest level since October 2025 as Fed rate hike bets weigh.
- The US Dollar and Treasury yields bounce off intraday lows, adding pressure on bullion.
- XAU/USD remains below its main daily moving averages, with weak momentum leaving room for further losses.
Gold (XAU/USD) plunges nearly 3% on Friday, hitting fresh year-to-date lows. The metal struggles despite a risk-off mood driven by a technology stock sell-off over AI spending concerns. A hawkish Federal Reserve (Fed) outlook continues to act as a headwind, while investors may also be liquidating Gold positions to cover losses elsewhere. The decline leaves yellow metal on track to end the month in negative territory.
At the time of writing, XAU/USD trades around $3,897, its lowest level since October 2025.
Traders turn risk-averse as disappointing technology earnings renew concerns about heavy AI spending and whether those investments will generate sufficient returns. Investors move into government bonds, pushing US Treasury yields lower and dragging the US Dollar down. However, both have since recovered some ground, adding to the pressure on Gold.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, fell to 101.53 before recovering above 102.00.
Adding to the cautious mood, reports of a major security breach at cryptocurrency exchange Binance weigh on digital assets and further unsettle investors. Gold has so far failed to benefit from the risk-averse mood, as traders focus on rising Oil prices amid Middle East tensions and their impact on inflation and interest rates.
West Texas Intermediate (WTI) trades above $103 a barrel, climbing to its highest level since May amid concerns that the US could resume military strikes against Iran after next week’s US midterm elections.
Higher energy costs risk keeping inflation above the Fed’s 2% target for longer. Data released on Thursday showed that September headline Personal Consumption Expenditures (PCE) inflation rose 0.5% MoM and 3.6% YoY, while the core measure increased 0.3% MoM and 3.1% YoY.
Traders price in around a 75% chance of a December rate hike, according to the CME FedWatch Tool, after the Fed left rates unchanged in October. Higher borrowing costs tend to weigh on Gold, as it offers no interest income. Richmond Fed President Thomas Barkin said on Friday that “the AI investment surge has pressured supply chains, and that is inflationary.” He added that AI investment is creating demand-driven inflation, which the Fed can lean against.
US demand boom keeps pressure on Fed policy path
According to economists at TD Securities, “booming domestic demand continued to lift US economic activity during the third quarter, with AI capex and a buoying consumer acting as the main growth engines.” They note that while this strength “bodes well for the economy's momentum near term, it does not do the Fed any favors regarding the inflation outlook.”
In their view, “as long as financial conditions remain broadly supportive, domestic demand will likely stay robust and inflation sticky above target,” implying that “the Fed will likely find itself having more work to do on the policy front.” TD Securities conclude that this backdrop “supports our view that the Fed will have to further tighten the policy screws in the near future: we look for an additional 50 bps worth of tightening between now and Q1 2027.”
Technical analysis: XAU/USD eyes deeper losses below $4000
On the daily chart, XAU/USD has been making lower highs and lower lows since peaking near $4,700 in late August. The metal trades below the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), keeping sellers in control. The Relative Strength Index (RSI) near 31 signals subdued buying interest, while the Moving Average Convergence Divergence (MACD) remains in negative territory, suggesting that downside pressure persists.
Initial resistance stands at $4,000, followed by $4,100, the 100-day SMA near $4,214 and the nearby 50-day SMA at $4,255. A stronger recovery could bring horizontal resistance at $4,400 into focus, followed by the 200-day SMA around $4,491.
On the downside, $3,900 offers immediate support. A break below this level could open the door to deeper losses toward $3,800.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Vishal Chaturvedi
FXStreet
I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.
