Author: Revc, Golden Finance
On Thursday (October 31), spot gold plunged $43.50, or 1.56%, after hitting a record high. This plunge revealed the volatility of investors' risk aversion. As gold pulled back, the crypto market and US stocks also experienced varying degrees of volatility, reflecting investors' uncertainty about the future direction of the economy.
The price of gold once hit $2,790.11 per ounce, a record high. However, due to the release of strong US economic data, investors chose to take profits at high levels, causing gold prices to fall rapidly. According to Bloomberg analysis, gold recorded its biggest single-day drop since July, reflecting the pressure on the market from strong employment data and the core personal consumption expenditures (PCE) index. Data showed that the US core PCE price index rose 2.7% year-on-year in September, the same as the previous value and exceeding the expected 2.6%. This level of inflation has heightened expectations that the Federal Reserve will pause its interest rate cuts.
Peter Cardillo, chief market economist at Spartan Capital Securities, said that Thursday's economic data further consolidated the market's expectations of rising inflation in the future, which caused a brief decline in demand for gold as a safe-haven asset. However, StoneX analyst Rhona O'Connell pointed out that geopolitical tensions and the upcoming US election are still important factors supporting gold, and the market's willingness to buy gold on dips remains strong.
US stocks also fell sharply that day, especially the selling pressure on technology stocks was significant. The Nasdaq fell nearly 3%, with Microsoft and Meta suffering heavy losses on concerns about AI spending, falling 6% and 4%, respectively. Although Microsoft and Meta's earnings reports were better than market expectations, future capital expenditures increased investors' concerns about AI costs. The S&P 500 fell 1.86%, and the Dow Jones fell 0.9%, affected by technology stocks.
At the same time, the U.S. Department of Labor reported that initial jobless claims fell to 216,000, the lowest level since May. This strong labor market performance reduced market expectations for future loose monetary policy. Market sentiment has gradually turned conservative as the unemployment rate in the United States has remained low, and investors are worried about the further erosion of corporate profits by high interest rates.
With the sharp fluctuations in gold and US stocks, the crypto market has also seen a significant correction in the past 24 hours. The price of Bitcoin hit a low of $68,830, and the entire network was liquidated for nearly $250 million. Some analysts believe that Bitcoin has led the market sentiment to turn to "greed." Among the major cryptocurrencies, Ethereum performed relatively weakly, with a price drop of 3.16%, showing a trend of investors focusing more on Bitcoin. The overall market value of the cryptocurrency market fell slightly by 1.90%, which means that the market has entered a consolidation phase after the previous rise.
The news that Microstrategy will raise $42 billion to buy more Bitcoin further boosted market sentiment, while Coinbase CEO said the next Congress will be the "most crypto-friendly" Congress ever, which also reflects the trend of the crypto market gradually receiving broader policy support.
Behind the resonance of gold, cryptocurrency and U.S. stock markets, the U.S. election and the upcoming non-agricultural employment data are undoubtedly the dominant factors. Analyst Valencia pointed out that investors' risk appetite decreased before the U.S. election on November 5. In particular, the market is betting that the election showdown between former Republican President Trump and Democratic Vice President Harris will affect the trend of financial markets. With the intensification of geopolitical tensions and the uncertainty of the election results, the safe-haven demand for gold remains strong, and many investors still regard it as an ideal asset to hedge against future uncertainties.
In addition, the upcoming release of the non-farm payrolls report (Beijing time November 1, 20:30) is also the focus of market attention. It is expected that the number of non-farm payrolls in October will drop significantly due to hurricanes and strikes. If the report meets expectations, it may weaken the market's confidence in the Fed's continued interest rate cuts. Investors generally expect the Fed to suspend interest rate cuts at its meeting in early November.
The changes in the global economic and political situation have made the linkage effect of gold, cryptocurrencies and US stocks more obvious. With uncertainty about inflation and the Fed's interest rate policy, and the US election and geopolitical tensions still unclear, investors are seeking safe-haven opportunities in different markets. Gold is likely to maintain its status as a "safe haven" after a short-term correction, while the crypto market has shown greater resilience driven by policy and institutional support. U.S. stocks are more sensitive to the volatility of technology stocks.
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