Key Points
- Gold rebounded to near $3,900 after hitting an annual low
- AI Stock declines trigger concerns about forced liquidations
- The decline in oil prices has alleviated the pressure stemming from the Federal Reserve's expectations.
On Monday, November 2nd, gold rebounded from a one-year low, thanks to falling oil prices and new buying interest that helped the precious metal stabilize after a significant sell-off in tech stocks.
Spot gold rose by about 0.7% to $3,900 per ounce; December-delivered U.S. gold futures increased by 0.3% to around $3,909. This rebound occurred after a 3.5% decline last Friday, when gold prices fell below $3,900 for the first time since October 2025.
Why does gold also experience a sharp drop when the AI stock price falls?
Gold has traditionally been regarded as a safe-haven asset, which means that investors tend to buy gold when financial markets are unstable. However, the selling pressure last Friday indicates that this relationship does not always hold true during periods of severe market stress.
Analysts from Commerzbank believe that the collection of margin and forced sales may have been one of the reasons for the decline last Friday. At the same time, they expect that once the current liquidation pressure subsides, precious metals will rebound.
This decline occurred simultaneously with a broader sell-off of AI stocks, and during October, the market value of several large technology companies evaporated by billions of dollars.
Investors are becoming increasingly concerned about whether expenditures on artificial intelligence infrastructure will yield sufficient returns.
At the same time, the broader selling pressure on NASDAQ indicates that concerns regarding the expenses associated with AI are spreading to technology stocks.
The weakening of gold also affected other precious metals. Silver fell by about 6.5% last Friday, dropping below $50; platinum and palladium also experienced significant declines.
The decline in oil prices has provided an opportunity for gold to rebound.
The rebound on November 2nd coincided with a significant drop in crude oil prices, as diplomatic discussions involving Iran increased the expectation that disruptions to supplies in the Middle East might be alleviated.
Brent crude oil fell by more than 3%, dropping back to around $109 per barrel, while at the end of October it was still above $117.
Lowering energy prices could ease inflation concerns, thereby weakening the market's expectation that the Federal Reserve will need to maintain high interest rates for a longer period.
This is very important for gold, as gold does not generate interest. Higher bond yields typically increase the opportunity cost of holding gold bars, while lower yields make gold relatively more attractive.
Coinpaper has previously analyzed the relationship between gold, inflation, and U.S. Treasury yields during another round of rebound.
However, Federal Reserve officials have recently signaled that further policy tightening is still possible, which has made investors cautious about the sustainability of a gold rebound.
Morgan Stanley's previous research regarded $4,000 as an important support level. The breakdown last Friday indicates that even a price level that receives widespread attention from institutions can be breached when liquidity deteriorates.
Can gold recover to $4,000 and shake off its worst October performance since 2008?
After recording its weakest October performance since the financial crisis in 2008, gold's rebound remains fragile.
The current technical challenge is to first stabilize above $3,900, and then there may be a rebound towards $3,950.
If it can continue to rebound above $4,000, it will more strongly indicate that buyers are taking back control of the situation. However, after recent losses, this level may now also turn into a resistance zone.
On the downside, the low of $3,870 around October 30 remains an important reference point. If it falls below that range, and with increased selling pressure, gold prices could drop to around $3,800.
Investors are also preparing for the U.S. mid-term elections on November 3rd and the employment report on November 6th, both of which could affect expectations regarding monetary policy and market volatility.
Previously, after the release of weak employment data, gold saw a round of gains, which demonstrates how quickly changes in interest rate expectations can affect gold prices.
Maya Bennett
Maya Bennett is a financial journalist with experience reporting on cryptocurrencies, stocks, and broader market trends. Her areas of focus include Bitcoin, major digital assets, the stock market, monetary policy, and economic developments that influence investor sentiment. She is adept at transforming rapidly changing market news into clear and concise reports.
