Gold (XAU/USD) trims its gains on Friday after briefly climbing above $3,900. The metal fell to $3,852 on Thursday, its lowest level since October 2025. Hawkish remarks from Federal Reserve (Fed) officials continue to fuel bets on an extended period of monetary policy tightening, overshadowing a mixed US Producer Price Index (PPI) report.

At the time of writing, XAU/USD trades around $3,880, down more than 4% so far this week.

The US PPI rose 0.3% MoM in October, below the 0.4% forecast and down from 1.4% in September. Annual producer inflation picked up to 6.5% from 6.3%, coming in below the 6.6% forecast. Core PPI rose 0.3% MoM, slowing from 0.8%, while the annual rate held at 5.0%. Both core readings matched expectations.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades little changed on the day near 103.19, just below the 19-month high of 103.30 it touched earlier. The index remains on track for a third straight weekly gain.

Dollar surges as Fed hike expectations drive short-end yields higher

Analysts at ING describe “a powerful, macro-driven rally in the dollar” this week, as markets rapidly reprice the Fed’s near-term path. They note that “short-dated US yields are close to 40bp higher since Tuesday morning, when the Fed's Christopher Waller mused over the need for a 50bp hike in December.” In the wake of those comments, ING highlights that “the market has since adopted the view that back-to-back December and January hikes look likely, while extending the full Fed adjustment from here to a full 85bp of tightening.”

A stronger US Dollar makes Gold more expensive for buyers using other currencies, while higher US Treasury yields raise the opportunity cost of holding the non-yielding metal.

Fed officials warn that inflation remains too high

Earlier this week, US Consumer Price Index (CPI) data showed headline inflation rose 0.4% MoM in October, above the 0.3% forecast. Core CPI, which excludes food and energy, rose 0.3% MoM, exceeding the 0.2% forecast.

Chicago Fed President Austan Goolsbee said on Friday inflation will determine the path of interest rates and agreed that the Fed still “has work to do” to bring inflation down. On Thursday, Cleveland Fed President Beth Hammack said inflation pressures were “moving in the wrong direction” and that the Fed needed to “move to a restrictive stance of policy” to bring inflation back to 2%.

San Francisco Fed President Mary Daly also said her “bias is that further tightening will be needed.” Dallas Fed President Lorie Logan said on Tuesday that the central bank needs “at least two more 25-basis-point rate increases” to bring inflation down.

Higher energy costs could keep inflation elevated as prospects for a deal to end the US-Iran war remain slim. West Texas Intermediate (WTI) crude jumped more than 3% on Thursday after US President Donald Trump said Washington did not need a deal with Iran to end the war.

Technical Analysis: Bearish bias persists below key daily SMAs

On the daily chart, XAU/USD is extending a bearish near-term bias as price holds below the 21-day, 50-day, and 100-day Simple Moving Averages (SMAs). The Relative Strength Index (RSI) at 37 stays below the midline, while the Moving Average Convergence Divergence (MACD) indicator is negative, both reinforcing a soft downside tone even as oversold conditions are not yet extreme.

On the topside, initial resistance emerges at the nearby horizontal barrier of $3,900, followed by the psychological $4,000 level, ahead of the 21-day SMA at $4,030, which caps any stronger recovery. Above there, the 50-day SMA at $4,154 and the 100-day SMA at $4,197 form a broader supply zone.

On the downside, Thursday’s low of $3,852 offers immediate support, followed by the $3,800 psychological level. A break below $3,800 could open the door to a deeper decline.