FX.co ★ XAU/USD, GOLD

Gold (XAU/USD) falls sharply by over 2.5% on Friday, posting fresh YTD lows. Gold fails to gain traction amid risk-off sentiment fueled by a tech sell-off over spending cuts linked to AI. A hawkish Fed stance remains a major barrier for gold, while market players may be unwinding Gold positions amid other losses. As of this writing, XAU/USD is trading at $3882, its lowest since October 2025. Traders are becoming risk-averse after poor earnings from the technology sector raise fears that big expenses in artificial intelligence may not bring adequate returns on investment. Investors shift to government bonds, causing US Treasury yields to drop and the US Dollar to fall. Yet, both have managed to recover some lost ground, putting additional pressure on gold. The US Dollar Index (DXY) measures the Greenback's strength against six major currencies and stands near 101.90, having rebounded from an intra-day low of 101.59 and interrupting a two-day losing streak. Furthermore, news of the massive hack at cryptocurrency exchange Binance adds to investor caution and weighs on digital currencies. So far, gold has not found support from risk-aversion sentiment because traders are concerned about rising oil prices amid tensions in the Middle East. WTI is trading above $103 per barrel, hitting its highest levels since May, as there are worries that the US may launch attacks on Iran following the US mid-term elections next week. High energy prices are a cause for concern because they risk prolonged inflation above the Fed's 2% target. The latest data, published Thursday, showed headline PCE inflation up 0.5% MoM and 3.6% YoY, while core PCE inflation rose 0.3% MoM and 3.1% YoY. According to the CME FedWatch Tool, there is about a 75% chance of a December rate hike, given that the Fed kept rates on hold in October. Higher interest rates negatively affect gold because it provides no interest income. As pointed out by analysts at ING, apart from Powell, today marks the end of the FOMC blackout period, which will feature remarks from Thomas Barkin, Mary Daly, and Alberto Musalem, but "they don't feel there is much members can add at this point, as markets have already priced in a December hike and dovish remarks would be unwarranted considering the latest developments in energy prices." In the same vein, ING believes that "risks to the Dollar have increased due to renewed worries over AI and US midterm elections, despite the still hawkish stance of the Fed." XAU/USD on the daily chart has formed lower highs and lows since its peak near $4,700 in late August. The commodity is trading below its 50-day, 100-day, and 200-day SMAs, favoring the bears. The RSI at 31 indicates weak buying interest, while the MACD stays in the negative zone, indicating downward pressure remains intact. Immediate resistance is near $4,000, then at $4,100; the 100-day SMA is near $4,214, along with the nearby 50-day SMA near $4,255. Any sharp rebound would face horizontal resistance near $4,400, then the 200-day SMA near $4,491. Support for XAU/USD can be seen near $3,900. Any further decline below this level may lead to deeper corrections towards $3,800.