Spot gold faced heavy selling pressure for a second straight day, trading below the psychological $4,000 mark during Friday's (October 30) Asian session, weighed down by hawkish Federal Reserve expectations.
Thursday's US macroeconomic data pointed to resilient economic growth and persistent price pressures, reinforcing market bets on a December rate hike, which in turn undermined non-yielding gold and supported the case for further depreciation.
The preliminary third-quarter GDP reading showed the US economy accelerating to an annualized 3.4%, up from 2.2% in the prior quarter and beating the 3.2% consensus estimate.
The Commerce Department also reported that the September personal consumption expenditures (PCE) price index rose 0.5% month-on-month and 3.6% year-on-year; the core measure, which strips out volatile food and energy prices, climbed 0.3% month-on-month and 3.1% year-on-year.
Combined with inflation worries stoked by elevated US Treasury yields, this reinforced the prospect of further Fed tightening.
Safe-haven flows head to Treasuries, bypassing gold
Meanwhile, US Treasury yields fell sharply as weak technology earnings fueled concerns that rising AI spending may not deliver adequate returns, driving investors into safe-haven government bonds.
In addition, revived hopes for a diplomatic resolution to the Middle East conflict pushed the safe-haven dollar lower for a third consecutive day, but this did little to ease the bearish pressure surrounding gold.
On the latest developments, US Vice President JD Vance wrote to Iran's Supreme National Security Council secretary Mohsen Rezaei to push for a restart of peace talks, while Qatar submitted a new draft agreement to Iran aimed at ending its conflict with the US and Israel.
Geopolitical risk premium remains, but gold rallies are likely to be sold
Investors nonetheless remain vigilant, as hostilities escalate between Yemen's Houthi forces and Saudi Arabia.
Moreover, US and Israeli threats to resume attacks after the midterm elections keep the geopolitical risk premium firmly in place.
At the same time, Iran's navy said Thursday that four oil tankers struck mines in the Strait of Hormuz, heightening supply disruption fears and supporting oil prices.
This bolsters the case for buying the dollar on dips, suggesting the path of least resistance for gold is downward and that any rebound is likely to be sold.
Institutional views
Tang Yuxuan, head of Asia rates and FX strategy at JPMorgan Private Bank, said gold still faces further downside risk after its recent selloff, mainly due to thin market liquidity and the Fed's remaining room to hike.
The bank expects the Fed to raise rates once each in December and in the first quarter of 2027, driving the 10-year Treasury yield to a peak of 5.25%–5.5% by mid-2027.
Rising yields erode gold's appeal.
But once rates peak, gold will build a solid base, with the bank projecting a rise to $4,500 by mid-2027 and $5,000 by year-end, mainly benefiting from safe-haven demand and economic policy uncertainty.
UBS's Chief Investment Office (CIO) maintained a constructive view on gold over the next 12 months, forecasting the metal to reach $4,600 by December 2026, then climbing gradually to $5,000 by March 2027, $5,200 by June, and $5,400 by September 2027.
UBS believes that while recent higher real yields and a firm dollar pose short-term headwinds, central bank gold buying, reserve diversification, high government debt and geopolitical uncertainty remain core supports.
Any pullback toward $4,000 is seen as an opportunity to add exposure.
Investors are advised to maintain a mid-single-digit gold allocation.
Conclusion
Gold fell for a second consecutive day, with the core drag coming from Fed rate-hike bets — an above-forecast third-quarter GDP and stubborn PCE inflation together cemented December rate-hike expectations and sapped the appeal of non-yielding gold.
Notably, two factors that typically benefit gold — falling Treasury yields and a three-day dollar slide — failed to provide support this time, reflecting that the market is currently pricing the rate path rather than safe-haven demand.
Although the geopolitical risk premium remains, high oil prices have instead strengthened the logic for buying the dollar on dips, and gold rallies are likely to be sold.
(Spot gold daily chart, source: Yihuitong)
As of 14:49 Beijing time, spot gold was quoted at $3,984.80 an ounce.
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