Gold fell to its lowest price in more than a year on Friday, sliding below $3,900 an ounce after a week of hawkish central bank decisions, hot U.S. inflation data and a fresh sell-off in artificial intelligence stocks drove investors out of the metal.

Spot gold touched $3,870.25 late Friday afternoon in New York and was at $3,875.05 in Kitco News' late report, down 3.74% on the week and 3.62% on the day. Trading Economics put the metal at $3,874.08 late Friday, its weakest since October 2025 and more than 30% below January's record of $5,608.35.

Earlier on Friday, Reuters reported that spot gold had hit its lowest since July 17, a three-and-a-half-month low, and stood at $3,980.40 at 1107 GMT, down 4.3% for October and heading for a second straight monthly decline.

For Asia, the timing is awkward. The drop comes during India's festive and wedding season, when the World Gold Council said retailers had been restocking. It also cuts the value of China's official gold reserves, which stood at 2,346 metric tons in June, up from 2,313 tons at the prior reading, according to Trading Economics data.

Fed holds, but hike bets stay alive

The week started with a rebound. Spot gold began trading at $3,994.95 on Sunday evening and climbed back above $4,050 on Tuesday as Treasury yields eased, according to Kitco's weekly survey. It set a weekly high of $4,082.50 on Wednesday afternoon, after the Federal Reserve held its target range at 3.75% to 4% in a 10-2 vote. Both dissenters wanted an immediate quarter-point increase.

Sellers returned on Thursday. U.S. gross domestic product grew at a 3.4% annualized rate in the third quarter, above the 3.2% economists expected, and the personal consumption expenditures price index rose 0.5% in September, its biggest monthly gain since March, Trading Economics reported. Annual PCE inflation reached 3.6%, with the core measure at 3.1%. Early Friday in Asian trading, markets priced roughly a 75% chance of a December rate increase, according to CME FedWatch data cited by Trading Economics.

The other major central banks struck a similar tone. The European Central Bank kept its deposit rate at 2.50% on Thursday and said rising energy prices posed upside risks to inflation, in what market participants saw as a hawkish hold, Reuters reported. ECB President Christine Lagarde also announced she would step down early. On Friday, the Bank of Japan kept its target for the overnight call rate at around 1.25% in an 8-1 vote, its statement showed.

Higher rates raise the cost of holding bullion, which pays no interest. Giovanni Staunovo, an analyst at UBS, told Reuters that the strong growth figures and rising oil prices were adding pressure on the Fed to tighten further.

AI rout sets off forced selling

Friday's drop had a second trigger. Alphabet's results revived worries about soaring AI costs on Thursday, Reuters reported, and a broader technology sell-off on Friday, driven by doubts over returns on AI investment, set off liquidation across precious metals, according to Kitco.

Waleed Said, a technical analyst at GivTrade, said investors sold gold to cover margin calls in other markets. "Gold is liquid, so it is the first thing that gets sold," he told Kitco News.

The decline came even as Treasury yields and the dollar eased, moves that usually lower the opportunity cost of owning gold. Kitco's Neils Christensen wrote that traders were pricing where monetary policy is heading, not where yields stand today.

Oil added to the pressure. An attack on a tanker in the Strait of Hormuz lifted crude on Friday and put it on course for a fourth monthly gain, Reuters reported. Philip Streible, chief market strategist at Blue Line Futures, told Kitco that oil has become the market's main inflation trade, which leaves gold exposed while the Fed leans toward hikes.

Silver fared worse. By Friday afternoon in New York it was down nearly 6% on the day at $48.95 an ounce and nearly 9% for the week, its worst weekly decline since early June, Kitco reported.

Asian buyers and the outlook

Physical demand across Asia's main gold markets stayed subdued during the week, according to Trading Economics. In India, buying had been picking up before the latest drop. Kavita Chacko, research head for India at the World Gold Council, wrote in an update published Oct. 20 that local dealer discounts had narrowed to $8 an ounce by Oct. 16 from an average of $66 in September as seasonal demand improved, Kitco reported. Indian gold exchange-traded funds drew net inflows of INR 44.5 billion in September, the most in seven months.

Before Friday's drop, research firm Metals Focus said buying by central banks and long-term investors had left gold better insulated than silver, according to Kitco.

Forecasters are split. Analysts cut their 2026 gold forecasts for a second straight quarter but still expect a recovery in 2027, a Reuters survey cited on Wednesday showed. Staunovo said gold could reach $5,000 or more next year once the Fed is forced to cut rates again. Marc Chandler, managing director at Bannockburn Global Forex, said prices could slip to a range of $3,750 to $3,850 an ounce, while Daniel Pavilonis of StoneX Group said gold could drop as low as about $3,000, likely in the first quarter of 2027.

On Friday afternoon, gold traded roughly 13.5% below its 200-day moving average, which sits near $4,490, Kitco reported.

Next week brings the U.S. midterm elections and fresh U.S. employment data. In the region, the Reserve Bank of Australia, which has raised rates four times this year, announces its decision on Nov. 3, with markets seeing a high chance of another increase, Reuters reported.