On Thursday (October 31), spot gold fell by $43.50 after reaching a historical high, a decline of 1.56%. This sharp drop revealed the volatility of investor risk aversion. As gold pulled back, the cryptocurrency market and U.S. stocks also experienced varying degrees of turbulence, reflecting investors' uncertainty about the future direction of the economy.
Gold: Pullback from New Highs
On that day, the price of gold briefly surged to $2,790.11 per ounce, reaching a historical high. However, due to the release of strong U.S. economic data, investors chose to take profits at high levels, leading to a rapid decline in gold prices. Gold recorded its largest 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 U.S. Core PCE Price Index increased by 2.7% year-on-year in September, matching the previous value and exceeding expectations of 2.6%. This level of inflation intensified expectations for the Federal Reserve to pause interest rate cuts.
Economic data released on Thursday further solidified market expectations for rising inflation in the future, which led to a brief decline in demand for gold as a safe-haven asset. However, geopolitical tensions and the upcoming U.S. elections remain important factors supporting gold, and market willingness to buy gold on dips remains strong.
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U.S. Stock Market Volatility: Tech Stocks Under Pressure
On the same day, U.S. stocks also saw significant declines, particularly with notable selling pressure on tech stocks. The Nasdaq index fell nearly 3%, while Microsoft and Meta faced sharp declines of 6% and 4%, respectively, due to concerns over artificial intelligence spending. Although Microsoft and Meta's earnings reports exceeded market expectations, they heightened investor worries about increased capital expenditures related to AI costs. The S&P 500 index fell by 1.86%, while the Dow Jones index declined by 0.9% due to the impact of tech stocks.
Meanwhile, the U.S. Labor Department reported that the number of initial unemployment claims fell to 216,000, the lowest level since May. This strong labor market performance has reduced market expectations for future easing of monetary policy. Market sentiment has gradually shifted to a conservative stance due to the persistently low U.S. unemployment rate, with investors concerned about the further erosion of corporate profits due to high interest rates.
Cryptocurrency Market: Bitcoin's 'Greed' Sentiment
With the severe fluctuations in gold and U.S. stocks, the cryptocurrency market has also seen a noticeable pullback in the past 24 hours. The price of Bitcoin fell to a low of $68,830, with nearly $250 million in liquidations across the network. Some analysts believe that Bitcoin's dominance has shifted market sentiment towards 'greed.' Among major cryptocurrencies, Ethereum performed relatively weakly, down 3.16%, indicating a trend where investors are focusing more on Bitcoin. The overall market capitalization of the cryptocurrency market decreased slightly by 1.90%, suggesting that the market has entered a consolidation phase after the previous rise.
The news that Microstrategy plans to raise $4.2 billion to purchase more Bitcoin further boosted market sentiment, while the CEO of Coinbase stated that the next Congress will be the 'most supportive of cryptocurrencies in history,' reflecting a trend of increasing policy support for the cryptocurrency market.
U.S. Elections and Non-Farm Report: Market Awaits Direction
Behind the resonance of the gold, cryptocurrency, and U.S. stock markets, the U.S. elections and the upcoming non-farm payroll data are undoubtedly the dominant factors. Ahead of the U.S. elections on November 5, investor risk appetite has decreased. In particular, the market bets that the campaign showdown between former Republican President Trump and Democratic Vice President Harris will influence the trajectory of financial markets. With the intensification of geopolitical tensions and the uncertainty of election outcomes, the safe-haven demand for gold remains robust, and many investors still see it as an ideal asset to hedge against future uncertainties.
Additionally, the upcoming release of the non-farm payroll report (scheduled for November 1 at 20:30 Beijing time) is also a focal point for the market. October non-farm payrolls are expected to show a significant decline due to the impact of hurricanes and strikes. If the report meets expectations, it may weaken market confidence in the Federal Reserve's continued interest rate cuts. Investors generally expect the Federal Reserve to pause interest rate cuts at the early November meeting.
Summary
The fluctuations in the global economic and political landscape have made the correlation between gold, cryptocurrencies, and U.S. stocks more apparent. With uncertainties surrounding inflation and the Federal Reserve's interest rate policies, as well as the unclear situation regarding the U.S. elections and geopolitical tensions, investors are seeking safe-haven opportunities across different markets. After a short-term pullback, gold may still maintain its status as a 'safe haven,' while the cryptocurrency market shows greater resilience driven by policy and institutional support. U.S. stocks, on the other hand, are more sensitive due to fluctuations in tech stocks.
