Thursday (October 22) brought a sudden and severe selloff to the global gold market.
Spot gold tumbled 2.8% to close at $4,025.23 per ounce, at one point touching $4,020.95, its lowest level since August 3.
U.S. December gold futures settled down 2.2% at $4,060.40 in tandem.
In just a single trading session, the yellow metal slid from relatively elevated levels to a more than two-month trough, with market sentiment clearly turning cautious.
The core driver of this decline was not a fading of traditional safe-haven demand, but rather a surge in oil prices that reignited inflation worries and reinforced expectations that interest rates could stay elevated for longer.
At the same time, a sharp correction in the artificial intelligence sector, a rare collapse in U.S. Treasury yields, and further escalation in Middle East geopolitical tensions together shaped the complex tug-of-war between bulls and bears currently surrounding gold.
Investors' attention is now firmly fixed on next week's Federal Reserve policy meeting and the subsequent release of personal consumption expenditure data.
In early Asian trading on Friday (October 22), spot gold hovered near lows, currently trading around $4,025 per ounce.
Oil Price Surge Ignites Inflation Expectations, Rate Path Back in Focus
After Houthi forces launched a fresh round of attacks on Saudi Arabia, market concerns over supply disruptions in this key Middle East energy-exporting region quickly intensified.
Brent crude futures jumped 4.0% in a single day to close at $113.17 per barrel, the highest settlement since May 4.
U.S. crude oil futures also rose 2.4% to $99.47.
Oil prices not only hit five-month highs but also entered technically overbought territory for the third time in a week.
The overnight jump in energy prices transmitted directly to the inflation expectations level.
David Meger, director of metals trading at High Ridge Futures, noted that rising energy prices are amplifying market concerns about inflationary pressures, and as inflation pressures mount, the market is becoming noticeably worried that the Fed will continue raising rates.
Last week's U.S. consumer and producer inflation data both came in above expectations, further providing justification for tightening monetary policy.
Although the market still widely expects the Fed to hold steady at its October 27-28 meeting, the CME FedWatch tool shows traders now pricing a 78% probability of a December rate hike.
The U.S. personal consumption expenditures (PCE) data due on October 29 will be the next key observation window.
If the data continues to show sticky inflation, market pricing for a "higher for longer" rate path could strengthen further, weighing on gold.
As a zero-yield asset, gold tends to come under pressure when real rate expectations rise, a point clearly reflected in Thursday's trading.
Tug-of-War Between Safe Haven and Risk Appetite: AI Concerns Drive Treasury Selloff but Fail to Lift Gold
In stark contrast to the inflation fears stoked by oil prices, U.S. stocks, especially tech shares, suffered heavy losses on Thursday.
The Nasdaq plunged 2.60%, its largest single-day drop since early June.
The S&P 500 fell 1.21%.
Meta disclosed in its earnings report that AI-related spending caused its first cash outflow in over a decade and announced the issuance of non-voting shares to fund AI expansion, sending its stock down nearly 8%.
Tesla also fell 3.1% after lowering its capital expenditure forecast.
The Philadelphia Semiconductor Index plummeted 6.7%.
Renewed doubts about the sustainability of AI spending and related investment returns triggered a selloff in risk assets, with capital rushing into safe-haven assets such as U.S. Treasuries.
The 10-year Treasury yield plunged 19.3 basis points in a single day to 4.953%, the largest one-day drop since March 2023.
The 30-year yield fell 15 basis points, while the two-year yield dropped 18.5 basis points.
Thomas Urano, co-chief investment officer at Sage Advisory, said investors had already priced in inflation and the possibility of further Fed rate hikes, but changes in risk asset performance and financial conditions are driving flows into U.S. government bonds.
Over the past week, safe-haven trading has clearly dominated the Treasury market.
It is worth noting that a sharp pullback in Treasury yields typically supports gold, as falling real rates reduce the opportunity cost of holding the metal.
However, gold fell in tandem on Thursday, indicating that oil-driven inflation concerns and the resulting reinforced rate hike expectations temporarily overshadowed the benefits of declining yields.
In the contest between "energy inflation" and "safe-haven buying," the former has temporarily gained the upper hand.
Geopolitical Risks Continue to Simmer, but Gold's Safe-Haven Properties Not Yet Fully Unleashed
Tensions in the Middle East have not eased despite rising oil prices.
Saudi Aramco has asked employees to evacuate its Dhahran headquarters near Bahrain on the Persian Gulf coast, as conflict between Houthi forces and the Saudi-led coalition continues to escalate.
Analysts noted that although reports suggest Middle East crude exports have exceeded pre-conflict levels, attacks on vessels in the Strait of Hormuz and Houthi strikes targeting Saudi oil infrastructure are enough to offset the impact of increased exports.
Morgan Stanley estimates last week's Middle East crude exports at about 17 million barrels per day, still slightly below the pre-conflict average of about 18 million barrels per day a year earlier.
Against this backdrop, gold as a traditional safe-haven asset should in theory find support.
But current market pricing logic leans more toward the chain of "inflation → rates → opportunity cost" rather than pure geopolitical hedging.
As long as expectations of the Fed maintaining higher rates are not disproven, gold's upward momentum will remain constrained.
Meanwhile, India, the world's largest silver consumer, has issued permits to import about 6,500 metric tons of silver over the next six months to meet festive-season demand, reflecting some resilience in physical demand but having limited direct impact on gold prices.
Key Catalysts Loom Next Week, Gold May Face Directional Choice
In summary, Thursday's sharp gold pullback was the result of oil price gains stoking inflation concerns, reinforced rate hike expectations, and AI sector turmoil triggering shifts in market sentiment.
Although the Treasury yield collapse released safe-haven signals, it failed to reverse gold's downward trend, demonstrating that rate expectations currently hold dominant sway over the metal.
Looking ahead to next week, the Fed meeting and PCE data will be the key variables determining gold's short-term direction.
If the Fed delivers a more hawkish signal on inflation in its statement or dot plot, or if PCE data continues to beat expectations, gold could come under further pressure, testing the $4,000 level or even lower support zones.
Conversely, if data or policy remarks ease market concerns about "higher for longer" rates, combined with persistent Middle East geopolitical risks, gold may stabilize at current levels and seek a rebound.
With gold now at a more than two-month low, technical oversold signals are beginning to emerge, but fundamental factors remain mixed, and directional choice still awaits next week's key events.
While monitoring the rate path, investors also need to closely track Middle East developments and changes in global risk appetite.
The gold market is currently in an environment shaped by inflation, rates, and geopolitics, and short-term volatility may intensify, with attention focused on the $4,000 support level.
As of 07:05 Beijing time, spot gold was quoted at $4,023.98 per ounce.
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