Gold prices drop sharply at the end of October. The collapse of the safe-haven myth or a search for liquidity?

The precious metals market is undergoing one of its most violent sell-offs in years. On Friday, October 30, gold fell by more than 3% during the session, diving below $3,900, even though holding $4,000 was still at stake earlier this week. At the same time, it risks closing at its lowest level in over 12 months. It is worth mentioning here that at the end of August, the bullion was approaching a peak near $4,700, so it has lost nearly $800 since then. In October alone, the decline amounts to around 6%. According to our data covering monthly returns since 2006, this is the worst October for gold since 2008. Back then, following the collapse of Lehman Brothers, the bullion lost 16.9%—a moment when the safe-haven factor should have kicked in, yet gold fell sharply. A similar dynamic is happening now, demonstrating that when investors seek liquidity, there is no safe haven other than cash. The year 2020 showed us the exact same pattern.

Tech crash on Wall Street

The direct trigger for Friday's sell-off was another wave of decline among tech companies. Disappointing quarterly results deepened doubts about whether massive investments in artificial intelligence will pay off. The Nasdaq 100 fell about 2.2% in Friday's spot market, while the S&P 500 lost around 1.3%, sliding toward its 100-day moving average. Intel shares fell nearly 30% following weaker-than-expected forecasts, and Amazon lost 2% after announcing higher capital expenditures. According to Bloomberg, US tech giants will spend a combined total of around $750 billion on AI this year. Meanwhile, their core businesses—advertising, e-commerce, and consumer services—are starting to slow down, partly cannibalized by the very same technology. The Nasdaq 100 lost more than $1.2 trillion in market capitalization in October. Wall Street analysts point out that during steeper index declines, investors stop shifting capital between sectors and start fleeing into cash. This exact mechanism is driving the sell-off in gold today.

The safe-haven paradox

Gold is falling even though risk aversion clearly dominates the markets. However, capital seeking safety is primarily flowing into US Treasuries, which are heading for their best month since February 2025. Interestingly, the rise in bond prices—causing a decline in yields—is occurring alongside rising crude oil prices. This drains liquidity from equities, and gold gets pulled into the downward momentum. Investors who need to meet margin calls are selling what is most liquid and what brought the biggest gains. Gold and silver fit this profile perfectly.

Unrest has also gripped cryptocurrencies. Binance revealed a record hack, and Bitcoin fell below $77,000. Gold did not benefit from this turmoil, confirming that the current sell-off is driven by liquidity needs rather than fundamentals.

Hawkish Fed and high yields

The second pillar of the sell-off is monetary policy. On Wednesday, the Fed left interest rates unchanged but did not rule out a rate hike before the end of the year. According to CME FedWatch, the market is pricing in a more than 70% probability of a December rate hike. The 10-year US Treasury yield remains around 4.95%, so despite October's rally, the opportunity cost of holding gold remains very high.

Expectations of a rate hike were bolstered by September's PCE inflation data: an increase of 0.5% m/m (the strongest since March) and 3.6% y/y, with core inflation at 3.1% y/y. US GDP grew by 3.4% annualized in the third quarter versus the projected 3.2%. A strong economy and accelerating inflation strip the Fed of reasons to ease policy, while stripping gold of arguments for gains.

Oil, the Middle East, and midterms

Inflationary pressures are being fueled by oil. After another tanker attack in the Strait of Hormuz, Brent crude rose up to 2.5% during the session to around $117.76 per barrel, its highest since April. WTI crossed $104. The market fears that the US will resume strikes on Iran right after Tuesday's midterm elections. Geopolitical tensions, which usually support gold, are hurting it today because they solidify rate-hike expectations. Prediction markets are pricing the Democrats' chances of winning both houses of Congress at around 68%. Analysts view this as slightly negative for the US dollar, but even a marginally weaker dollar is not protecting gold from the sell-off today.

Technical Analysis

Since the August peak, gold has been forming a series of lower highs and lower lows on the daily chart. The price remains below its 50-, 100-, and 200-day moving averages. The RSI dropped into oversold territory around 30 points, but the MACD remains in a bearish setup. The nearest support lies in the $3,850–$3,880 range, and a break below it would open the door toward $3,800. Key resistance is now at $4,000, followed by $4,100 and the cluster of moving averages in the $4,200–$4,490 range.

Silver, platinum, and palladium under even greater pressure

Silver dropped nearly 5% on Friday to $49.64 per ounce, bringing its October decline to around 18%. In doing so, it gave back all gains since early December, when a two-month rally above $120 per ounce began. Despite technical oversold conditions, it still faces the risk of further long liquidation and selling by momentum funds, which could open the way toward $45. The gold-to-silver ratio rose to its highest level since December, reflecting silver's greater vulnerability to declines. Gold continues to attract investors who are less sensitive to interest rate changes.

Platinum and palladium also continued their decline. Year-to-date, platinum is down over 30%, while palladium has lost 40%. Beyond liquidity pressures and the prospect of higher interest rates, they are weighed down by a structural weakening in demand from the automotive sector.

What's next for gold prices?

The current sell-off in gold is the result of several overlapping factors. Following weak tech sector earnings, investors are seeking liquidity, while capital searching for safety is flowing into bonds rather than precious metals. Added to this are stubbornly high inflation, rising chances of a December rate hike, expensive crude oil, and uncertainty surrounding the midterm elections and the Middle East. Until the Fed signals a pivot toward easing and the Wall Street sell-off halts, gold remains vulnerable to testing lower levels despite being technically oversold. However, history from 2008 shows that after a phase of forced selling, the metal can quickly regain its safe-haven status.