【TMGM Financial Recap】US Midterm Elections and Nonfarm Payrolls Set the Stage for a Crucial Week for Gold Bulls as Prices Recover from Oversold Levels!

A 2.86% fall in the Nasdaq last Friday, its biggest daily percentage loss since early June, left the index 7.8% below its October 6 record high. The widespread retreat in technology shares was the standout development across global markets, as disappointing quarterly earnings from Intel and Amazon heightened doubts about the returns achievable from AI infrastructure spending. Intel shares lost 28.6%, alongside declines of 4.2% for Nvidia and 10.9% for AMD. A 7.2% drop in the Philadelphia Semiconductor Index took its losses for the month to more than 15%. Rather than drawing support from its traditional safe-haven role, gold also came under selling pressure, with precious metals caught in the sharp correction in equities. The corporate earnings that have sustained the AI rally are now showing signs of weakness. 

Gold’s ready liquidity can work against it when falling technology shares reduce fund net asset values and generate margin calls. Instead of attracting safe-haven buying, the metal is often subject to forced sales as one of the most liquid assets available. While Commerzbank expects precious metal prices to recover, it noted that sharp technology stock declines could lead to forced liquidation of safe-haven assets such as gold and trigger margin calls. Seen in that light, the selling on Friday appeared more consistent with investors converting assets into cash to meet liquidity needs in an extreme risk event than with a complete unravelling of gold’s long-term safe-haven rationale. 

Hawkish commentary from Federal Reserve officials provided another headwind for gold. Both the level of current price pressures and the time inflation had spent above the 2% target were unacceptable, the Dallas Fed president said last Friday. At least two additional rate rises of 25 basis points each were necessary before the Fed could pause to assess conditions, the official argued. The case for further tightening was also made by the St. Louis Fed president, who urged prompt action. The official’s reasoning was that gradual adjustments made earlier generally cause less disruption than substantial, abrupt moves made later. 

The Fed’s decision earlier last week left its target interest rate range at 3.75%–4.00%, but did not signal an end to tightening. It followed September’s rate rise, and officials generally indicated that the cycle remained unfinished. Because gold generates no interest, keeping rates higher for longer increases the opportunity cost of owning it. Elevated real yields, meanwhile, put direct pressure on the metal’s valuation. 

Markets expect Friday’s October nonfarm payrolls report to show 40,000 new jobs and unemployment unchanged at 4.2%, making it a particularly important release in a week of several tests for gold. Before then, Tuesday’s midterm elections in the United States could bring safe-haven-driven volatility as political uncertainty affects markets. The economic schedule also includes successive releases of October ISM purchasing managers’ indices, JOLTS job openings, the ADP employment report and initial jobless claims. Alongside those figures, results from Apple, AMD and Qualcomm will influence appetite for AI-related trades. The probability of a December rate rise currently stands at around 70%; as the December policy meeting draws closer, changes in inflation or employment data could cause markets to reassess those expectations. 

Gold’s Recovery Hinges on Rates and Technology Stocks:
The direction of gold after its slump depends on the Fed’s December rate decision, the ability of AI technology stocks to find stability, and developments in Iran and oil prices. Those factors will determine whether the metal recovers or its correction extends. Purchases by central banks and demand for safe-haven allocations still underpin gold, although elevated interest rates and subdued demand in Asia restrict the scope for gains.