【TMGM Financial Recap】Can Gold’s Rebound from Oversold Levels Hold as US Midterm Elections and Nonfarm Payrolls Set Up a Crucial Week for Bulls?

Gold failed to attract traditional safe-haven demand last Friday as a broad technology stock sell-off dominated global markets, dragging precious metals into the sharp equity correction. Investor doubts over whether AI infrastructure spending could deliver adequate returns deepened after disappointing quarterly results from Intel and Amazon. A 2.86% fall in the Nasdaq marked its steepest single-session percentage loss since early June and extended its retreat from the October 6 record high to 7.8%. Intel slumped 28.6%, while Nvidia lost 4.2% and AMD declined 10.9%. The Philadelphia Semiconductor Index shed 7.2%, pushing its monthly loss beyond 15%. With corporate earnings having supported the AI rally, emerging weaknesses in those earnings are beginning to undermine its foundations. 

Gold’s liquidity can make it a source of cash rather than a refuge when falling technology shares erode fund net asset values and trigger margin calls. In such conditions, investors are often forced to sell the metal, one of the most liquid assets. According to Commerzbank, steep technology stock losses could prompt forced liquidation of safe-haven assets such as gold and trigger margin calls, though the bank also expects precious metal prices to rebound. Friday’s fall therefore appeared to reflect investors raising cash to cover liquidity requirements during an extreme risk event, rather than a wholesale collapse in the long-term case for gold as a safe haven. 

Hawkish remarks from Federal Reserve officials added a second source of pressure on gold. Speaking last Friday, the Dallas Fed president described both prevailing price pressures and the prolonged period of inflation above the 2% target as unacceptable. In the official’s view, at least two further rate increases of 25 basis points each were needed before the Fed could pause to review conditions. Further tightening also received support from the St. Louis Fed president, who called for timely action on the grounds that early, gradual policy adjustments generally create less disruption than large, abrupt changes later. 

Although the Fed left its target interest rate range at 3.75%–4.00% earlier last week, the hold came after September’s rate increase, with officials broadly indicating that the tightening cycle had further to run. For gold, which pays no interest, a prolonged period of elevated rates raises the opportunity cost of holding the metal. High real yields also exert direct pressure on its valuation. 

The week ahead presents multiple challenges for gold, starting with the potential for safe-haven-driven volatility around Tuesday’s midterm elections in the United States. A sequence of economic releases will follow: October ISM purchasing managers’ indices, JOLTS job openings, the ADP employment report and initial jobless claims. Particular attention will turn to Friday’s October nonfarm payrolls report, for which markets anticipate 40,000 new jobs and an unemployment rate holding at 4.2%. Apple, AMD and Qualcomm earnings will also help shape sentiment towards AI-related trades. With the December policy meeting approaching, markets currently assign around a 70% probability to a rate hike that month. Shifts in inflation or employment data could lead to a repricing of those expectations. 

Market Analysis: What Will Determine Gold’s Next Move?
Gold’s ability to recover from its slump, rather than extend its correction, hinges on the Fed’s December rate decision, the prospects for stability in AI technology stocks, and developments in Iran and oil prices. Underlying support remains in place through central bank buying and demand for safe-haven allocations. However, elevated interest rates and subdued Asian demand constrain the metal’s upside potential.