Gold has fallen below $4,000 per troy ounce for the first time since July. The metal lost 3.3% over the week, even as investors actively bought US government bonds and other defensive assets amid doubts about the sustainability of the AI boom. This is yet another sign that gold has stopped serving as a “safe-haven asset” and is now falling alongside the rest of the market, the Financial Times (FT) writes.
Details
On October 23, spot gold fell to $3,986.5 an ounce, before partially recovering to close the day at $3,994.47. The previous day, the precious metal had lost 2.8%. The decline is taking place despite falling U.S. Treasury yields, the FT reports. This usually supports demand for gold: the metal itself pays no interest, so it benefits when bonds offer lower yields.
What’s happening
Gold is falling even as investors seek to reduce risk—a “notable divergence” from the market’s usual reaction, analysts at Berenberg say. According to their data, the last time the metal was this weak amid such a significant decline in U.S. Treasury yields was in December 2008, at the height of the global financial crisis, the FT reports.
Last year, traders actively used gold for speculative trades, helping drive its price to a record high. On January 29, the precious metal rose to more than $5,500 an ounce, but has since fallen 28.7%, according to Seeking Alpha, as some speculators began closing their positions.
The main factor behind the decline in precious metal prices this year has been a reassessment of expectations for U.S. Federal Reserve policy, says Eric Norland, chief economist at derivatives exchange CME Group. Instead of rate cuts, the market has begun pricing in rate hikes. Yet, Norland noted, it is “remarkable” that gold is still trading well above its level at the start of 2025. He attributes this to a combination of factors, including budget deficits that undermine confidence in bond markets, rising inflation, persistent geopolitical tensions, and continued gold purchases by central banks. Preliminary data from the World Gold Council show that central banks’ gold purchases reached their highest monthly level since November 2024 in September. The organization’s data are based on information from central banks and the International Monetary Fund.
What’s next for the price of gold
Berenberg analysts believe Friday’s close below the $4,000 mark is particularly significant for the market. If gold prices remain below this level, it could trigger further outflows from exchange-traded funds (ETFs) that invest in the precious metal and accelerate technical selling of mining stocks. The mining sector is already experiencing its worst week in seven months, the FT reports: shares in BHP and Rio Tinto have fallen 6% and 7%, respectively, over the past five days.
John Reade, senior market strategist at the World Gold Council, linked price fluctuations to the war in the Middle East and its impact on markets. He said high interest rates had made gold investments somewhat less attractive, while expensive energy had limited consumers’ ability to buy the metal. In the absence of gold purchases as a safe-haven asset this year, fundamental factors are playing a greater role than usual, he added.
However, some fund managers who spoke at the Financial Times conference on the precious metals market last week still expect prices to recover, the newspaper notes. ㅤ
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