- Gold dropped as much as 0.9% to less than $3,990 an ounce on Friday, the lowest since mid-July, after falling almost 3% on Thursday. It later pared losses, with spot gold down 0.3% at $4,014.86 an ounce at 11:10 a.m. in Singapore.
- Global X ETFs analyst Justin Lin said gold likely faced a “liquidity-driven selloff” as investors raised cash to fund margin calls and capital requirements. He added that the metal was close to testing a critical level of $3,900 an ounce.
- The probability of a quarter-point rate increase at the Fed’s meeting next week is below 10%, as traders lower their bets amid AI worries. Gold is down by more than a fifth since the US-Iran war started in late February.
- Silver fell 1.2% to $53.90 an ounce, while platinum and palladium edged higher. The Bloomberg Dollar Spot Index was little changed.
What Happened?
Gold slid below $4,000 as investors sold the precious metal during a cross-market stock rout, Bloomberg reported. Stock selloffs deepened on Friday, while Treasuries largely held gains from the previous session as investors rotated out of AI-related companies and sought safety in US bonds. Lin said this kind of selling tends to happen in sharp market downturns because gold is a great source of liquidity. Iran-backed Houthi militants claimed recent attacks on the Saudi Red Sea port of Yanbu and deadly strikes on an oil field and airport in the kingdom.
Why It Matters?
Lower yields and fading rate-hike bets are typically positive for gold, so its decline shows how forced selling and inflation worries are outweighing those tailwinds. Brent crude rose above $113 a barrel and was on track to gain 3% for the week, keeping inflation likely to stay sticky. OCBC analyst Christopher Wong said gold has struggled to respond positively to the recent decline in yields. He said broader risk reduction and lingering inflation concerns may be outweighing the relief from lower yields.
What’s Next?
The $3,900 level flagged by Global X is the next key support to watch if selling resumes. Next week’s Fed meeting matters, though markets see less than a 10% chance of a hike. Further attacks on Saudi energy infrastructure could push oil higher and add to inflation pressure. OCBC said it remains cautious on gold in the near term.
Affected Tickers and Coins: GC, SI, GLD
Source: Bloomberg
