【TMGM Financial Recap】Gold Rebounds from Oversold Levels as US Midterm Elections and Nonfarm Payrolls Present a Crucial Week for Bulls!

The most striking development in global markets last Friday was the broad slump in technology stocks. Disappointing quarterly results from Intel and Amazon intensified investor concerns about whether AI infrastructure spending could generate sufficient returns. The Nasdaq fell 2.86% in a single session, its largest daily percentage decline since early June, bringing its losses from the October 6 record high to 7.8%. Intel plunged 28.6%, Nvidia fell 4.2%, AMD tumbled 10.9%, and the Philadelphia Semiconductor Index dropped 7.2%, taking its monthly decline to more than 15%. Against this backdrop, gold was sold off rather than benefiting as a traditional safe-haven asset. Precious metals could not escape the pull of the sharp equity market correction. Corporate earnings have underpinned the AI rally, and cracks are now beginning to appear in that foundation. 

When a technology stock slump triggers declines in fund net asset values and margin calls, gold is often forcibly sold as one of the most liquid assets rather than bought as a safe haven. Commerzbank noted that sharp declines in technology stocks could trigger forced liquidation in safe-haven assets such as gold and lead to margin calls, although it also expects precious metal prices to recover. In other words, Friday’s decline looked more like investors cashing out to meet liquidity needs during an extreme risk event, rather than a complete breakdown of gold’s long-term safe-haven rationale. 

The second force weighing on gold came from hawkish comments by Federal Reserve officials. Last Friday, the Dallas Fed president said that both current price pressures and the length of time inflation has remained above the 2% target were unacceptable. The official argued that the Fed needed at least two more rate hikes of 25 basis points each before pausing to assess conditions. The St. Louis Fed president also advocated further policy tightening and stressed the need to act promptly, arguing that earlier, gradual adjustments generally cause less disruption than large and abrupt moves later. 

Earlier last week, the Fed decided to keep its target interest rate range unchanged at 3.75%–4.00%. However, that decision followed a rate hike in September and came as officials broadly signalled that the tightening cycle was not yet over. For non-interest-bearing gold, interest rates remaining elevated for longer increase the opportunity cost of holding the metal, while high real yields directly weigh on its valuation. 

Gold faces several tests in the coming week. The United States holds its midterm elections on Tuesday, and political uncertainty could trigger safe-haven-driven volatility. On the economic calendar, October ISM purchasing managers’ indices, JOLTS job openings, the ADP employment report and initial jobless claims will be released in succession. Friday’s October nonfarm payrolls report will be particularly important, with markets expecting 40,000 new jobs and an unchanged unemployment rate of 4.2%. Earnings from Apple, AMD and Qualcomm will also influence sentiment towards AI-related trades. Ahead of the December policy meeting, the probability of a December rate hike currently stands at around 70%, and any changes in inflation or employment data could prompt markets to reprice those expectations. 

Market Analysis:
Whether the Fed raises rates in December, whether AI technology stocks can stabilise, and developments in Iran and oil prices will determine whether gold emerges from its slump or continues its correction. Central bank purchases and demand for safe-haven allocations continue to provide underlying support, but high interest rates and weak Asian demand limit its upside potential.