Gold's Worst October Since '08: Is the Slide Over?

Gold concluded October with its most significant downturn since the 2008 financial crisis, closing Friday at $3,875 an ounce. The precious metal experienced a sharp 3.6% decline in its final trading session of the month.

Investors who recently added substantial amounts, approximately 150 tonnes, to gold exchange-traded funds (ETFs) since July are now facing losses, as much of this gold trades below their purchase price. This selloff is attributed to chart-driven sellers, with gold breaking key support levels.

Hedge funds have reduced their bullish gold positions for nine consecutive weeks. This trend, coupled with pressure from a declining stock market, suggests the downward momentum in gold prices may persist. Some market commentators attribute Friday's sharp drop to margin calls in the tech stock sector.

Escalating crude oil prices, a consequence of geopolitical tensions, are also impacting gold. A rise in oil prices typically fuels inflation, which in turn can keep the possibility of US interest rate hikes alive. Since gold does not yield interest, higher rates make it a less attractive investment.

Despite the bleak short-term outlook, some analysts suggest the worst of the selling might be nearing its end. Speculative positions in related markets like silver have significantly decreased. Predictions suggest a potential long-term rally for gold, with some forecasts aiming for $10,000 by 2027 or 2028.

Upcoming events, including the US midterm elections and the October jobs report, will be closely watched for their potential to influence gold's price. A recovery above $4,000 an ounce could signal a stabilization. Paradoxically, a severe stock market crash might prompt the Federal Reserve to reconsider expected rate hikes, which could eventually benefit gold.