Can gold overcome weakness below $3,900 ahead of US PPI data?

Sentiment towards Gold weakens as bets on aggressive Fed rate hikes put the metal on course for a steep weekly loss.
With US PPI data due, traders look for further signals on inflation and the Fed’s interest rate trajectory.
An RSI reading below 50 and a negative MACD continue to signal bearish technical conditions.

Pressure on Gold (XAU/USD) has left the metal more than 4% lower so far this week, with Friday’s gains narrowing after a brief move above $3,900. On Thursday, it touched $3,852, the lowest since October 2025. The US Dollar (USD) and US Treasury yields have risen as hawkish comments from Federal Reserve (Fed) officials strengthened expectations of prolonged monetary tightening.

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Attention is turning to the US Producer Price Index (PPI) release at 13:30 GMT. At the time of writing, XAU/USD trades near $3,889, a gain of 0.40% on the day.

How are Fed rate hike bets lifting the Dollar and short-term yields?

With markets swiftly reassessing the Fed’s near-term policy trajectory, ING analysts characterise this week’s move as “a powerful, macro-driven rally in the dollar”. Their assessment notes 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.” Following those remarks, ING observes 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 third consecutive weekly advance is in sight for the US Dollar Index (DXY), which is trading near 103.23, close to a 19-month high. The index measures the Greenback against six major currencies. For buyers using other currencies, a firmer US Dollar increases the cost of Gold; rising US Treasury yields also make it more costly to hold the metal, which offers no yield.

Why do Fed officials remain concerned about inflation?

October’s US Consumer Price Index (CPI) figures, released earlier this week, exceeded forecasts. Headline inflation increased 0.4% MoM against expectations of 0.3%, while core CPI, excluding food and energy, advanced 0.3% MoM versus a 0.2% forecast.

To bring inflation lower, the central bank needs “at least two more 25-basis-point rate increases”, Dallas Fed President Lorie Logan said on Tuesday.

Cleveland Fed President Beth Hammack warned on Thursday that inflation pressures were “moving in the wrong direction”. Returning inflation to 2% required the Fed to “move to a restrictive stance of policy”, she said. San Francisco Fed President Mary Daly similarly stated that her “bias is that further tightening will be needed.”

With little prospect of an agreement to end the US-Iran war, elevated energy costs could sustain inflation pressures. Thursday saw West Texas Intermediate (WTI) crude rise more than 3% after US President Donald Trump said Washington did not need an agreement with Iran to bring the war to an end.

Technical Analysis: Can Gold shake off its bearish bias below key daily SMAs?

Trading beneath its 21-day, 50-day and 100-day Simple Moving Averages (SMAs), XAU/USD retains a bearish near-term outlook on the daily chart. A Relative Strength Index (RSI) reading of 38 remains below the midpoint, alongside a negative Moving Average Convergence Divergence (MACD). Together, these indicators point to continued mild downside pressure, although oversold conditions are not yet extreme.

Any recovery first faces the nearby horizontal resistance at $3,900 and then the psychological $4,000 mark. Beyond these, the 21-day SMA at $4,031 limits the scope for a stronger rebound. A wider supply zone lies higher, between the 50-day SMA at $4,154 and the 100-day SMA at $4,197.

Immediate downside support sits at Thursday’s low of $3,852, with the psychological $3,800 mark next in line. Losing $3,800 could pave the way for a more pronounced fall.

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

Common questions about Gold

What makes Gold an investment choice?

Widely used to store value and facilitate exchange, Gold has occupied an important place throughout human history. Beyond its lustre and use in jewellery, the precious metal is now commonly regarded as a safe-haven asset, or an attractive investment in periods of uncertainty. Its independence from any particular issuer or government also underpins its widespread use as a hedge against inflation and currency depreciation.

Which buyers hold the most Gold?

The largest holders of Gold are central banks. To support their currencies during unsettled periods, they generally diversify reserves and purchase Gold, reinforcing perceptions of economic and currency strength. Substantial Gold reserves can bolster confidence in a country’s solvency. According to World Gold Council data, central banks expanded their reserves by 1,136 tonnes of Gold, valued at around $70 billion, in 2022. That marked the largest annual purchase on record. Emerging-economy central banks, including those in China, India and Turkey, are rapidly building their Gold holdings.

How does Gold move relative to other assets?

The US Dollar and US Treasuries, both important reserve and safe-haven assets, generally have an inverse relationship with Gold. Dollar weakness tends to lift Gold, helping investors and central banks diversify their holdings during turbulent periods. An inverse correlation also exists between Gold and risk assets: stock market gains tend to put pressure on the metal, whereas selling in riskier markets generally supports it.

Which factors influence Gold prices?

Several factors can influence Gold prices. Its safe-haven appeal means geopolitical instability or concerns over a severe recession can trigger a swift rise. Since Gold pays no yield, lower interest rates tend to support it, while a higher cost of borrowing usually puts pressure on the metal. Most price movements, however, hinge on the performance of the US Dollar (USD), as Gold is quoted in dollars (XAU/USD). Dollar strength tends to restrain Gold prices, while a weaker Dollar is likely to lift them.

Can gold overcome weakness below $3,900 ahead of US PPI data?

How are Fed rate hike bets lifting the Dollar and short-term yields?

Why do Fed officials remain concerned about inflation?

Technical Analysis: Can Gold shake off its bearish bias below key daily SMAs?