Gold had a difficult October. The precious metal fell 6.87% over the month and touched a yearly low of $3,870 an ounce on Friday, October 30. The drop came as markets increasingly priced in another US rate hike and as safe-haven demand faded at times during the month.
Why gold has been falling
1. Fed hike expectations. Gold pays no interest, so it becomes less attractive when interest rates rise. Markets currently price about an 80% chance that the Federal Reserve hikes rates in December, and two Fed officials voted for an immediate hike at the October meeting.
2. High real yields. With the 10-year Treasury yield hovering near 5% for much of October, investors can earn a strong return on safe government bonds, reducing the appeal of holding bullion.
3. Easing geopolitical tension. Oil prices fell late in the month on progress in US–Iran diplomacy, reducing some of the safe-haven demand that had supported gold.
4. Weakness across precious metals. Silver also struggled, falling below $54 and toward 11-month lows earlier in the month.
What could support a rebound?
- A weak US jobs report: Friday’s nonfarm payrolls data is the key event. A soft number could reduce December hike bets, lower yields and weaken the dollar, all supportive for gold.
- Renewed market stress: The AI-driven selloff in tech stocks has already pushed Treasury yields lower. A deeper equity correction could revive safe-haven demand.
- Geopolitical flare-ups: Any setback in Middle East diplomacy could quickly bring buyers back.
Key levels to watch
- Support: The $3,870 yearly low is the critical level. A clear break below it could open the door to further losses.
- Resistance: Gold needs to recover the $4,000 psychological level to signal that selling pressure is easing.
How traders can approach gold now
Gold is currently trading as a “rates story”. Its direction will likely follow US yields and the dollar. Traders should watch the US 2-year yield and the Dollar Index alongside gold charts, and be prepared for volatility around Friday’s jobs data and Tuesday’s US midterm elections.
Bottom line: Gold’s October slide reflects a market preparing for higher US rates. A recovery likely needs weaker US data or renewed risk aversion; until then, rallies may face selling pressure.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice. Trading forex and CFDs carries a high level of risk and may not be suitable for all investors. Market levels quoted are approximate at the time of writing.