Gold falls below $3,900, silver tumbles as Wall Street selloff triggers liquidation - Kitco PM Report

In late trading on Friday, the prices of spot gold and silver experienced significant declines as a selloff in technology stocks on Wall Street led to increased liquidation pressures across the precious metals market. This downturn occurred despite falling Treasury yields and rising geopolitical tensions, which typically provide some level of support for gold and silver prices. Crude oil prices also saw a rise of over 2% following the attack on another tanker in the Strait of Hormuz, which has raised concerns about inflation and the potential for continued restrictive monetary policy from the Federal Reserve. Spot gold was quoted at approximately $3,879.90 per ounce, reflecting a drop of $141.60, or 3.52%. Meanwhile, spot silver was trading around $49.015, down $3.150, or 6.06% for the session.

Economic reports released on Friday painted a mixed picture of the U.S. economy, showing signs of moderating wage growth alongside weakening manufacturing activity in certain regions. The employment cost index for the third quarter rose by 0.8%, aligning with expectations but slowing from a 0.9% increase in the second quarter. Additionally, the Chicago purchasing managers' index for October fell to 55.3 from 58.8 in September, which was below the anticipated 56.1 but still indicated expansion as it remained above the crucial 50-point mark. These softer economic indicators followed a stronger-than-expected GDP report from Thursday, which revealed that the U.S. economy grew at an annualized rate of 3.4% in the third quarter, up from 2.2% in the previous quarter. In September, the headline personal consumption expenditures inflation rate accelerated to 3.6% annually, with core PCE inflation rising to 3.1%, adding to concerns about persistent inflationary pressures.

Market sentiment remains split between optimism regarding economic growth, ongoing inflation, and the potential for instability in financial markets. The Federal Reserve maintained its benchmark interest rate at 3.75% to 4.00% during its latest meeting, with two policymakers advocating for a 25-basis-point increase. Futures contracts indicate significant expectations for further tightening in December; however, the softer employment data and the sharp decline in equity markets on Friday tempered the inflationary implications of strong GDP growth and rising energy prices. As investors sought the safety of government bonds, Treasury yields fell, with the benchmark 10-year yield nearing 4.93% and the two-year yield close to 4.58%. Nevertheless, the ongoing decline in gold prices suggests that broader market liquidation and portfolio adjustments are currently more influential than immediate demand for safe-haven assets.

The situation in the Strait of Hormuz and U.S.-Iran relations continued to be a significant source of uncertainty in the energy markets after a commercial tanker was attacked in the strategic waterway. The vessel was reportedly hit by explosive devices attached to its hull by a small boat, underscoring the ongoing risks to commercial shipping despite diplomatic efforts to ease tensions in the region. The identity of those responsible for the attack had not been confirmed. This incident heightened concerns that renewed military confrontations between Iran and the United States could disrupt Middle Eastern energy exports, particularly as markets brace for potential military actions following the U.S. midterm elections on November 3. Ongoing negotiations involving Washington, Tehran, and regional mediators have yet to yield a confirmed resolution, leaving key issues such as sanctions and maritime security unresolved.

Crude oil futures surged more than 2% on Friday, marking their highest settlements since late April as traders evaluated the potential for renewed disruptions to energy supplies in the Gulf. December Brent crude futures rose by $2.76, or 2.4%, closing at $117.64 per barrel after reaching an intraday high of $118.00. The more actively traded January Brent contract increased by $2.63 to settle at $113.43, while Nymex WTI futures climbed $2.12, or 2.08%, to finish at $104.12. Over the course of October, Brent crude prices increased by approximately 13.6%, while WTI prices rose by 15.2%, reflecting ongoing concerns about the security of Middle Eastern supply and the inflationary effects of the regional conflict.

For gold, the recent attack in Hormuz underscored underlying geopolitical demand, but the rise in crude prices also raised the risk of persistent inflation, suggesting that the Federal Reserve may continue its restrictive monetary policies. The notable drop in gold prices, despite falling Treasury yields, indicates that broader financial market liquidation was the primary factor influencing Friday's trading. Silver, in particular, faced even greater losses, as the struggles in precious metals coincided with worries about industrial demand, equity valuations, and tightening financing conditions. The widening gold-silver ratio highlighted silver's heightened sensitivity to deteriorating risk sentiment and concerns surrounding manufacturing activity.

North American stock markets closed sharply lower on Friday, driven by disappointing corporate earnings and fears related to investments in artificial intelligence, which prompted significant selling in technology stocks. The Dow Jones Industrial Average fell by about 1.1% to finish at 51,770.31, while the S&P 500 dropped 1.8% to close at 7,580.07, marking its largest single-day decline since June. The Nasdaq Composite experienced a 2.9% decrease, closing near 25,437, as weakness in semiconductor and major technology stocks dominated the trading session. Intel's shares plummeted nearly 29% following disappointing profit forecasts, while concerns about Amazon's capital expenditures further pressured the tech sector. The Russell 2000 index also fell 1.7% to 2,811.84, indicating that the selling trend affected not only large-cap growth companies but also smaller firms. In Canada, the S&P/TSX Composite Index also experienced a significant decline, dropping over 2% as weakness in precious metals mining and other resource stocks compounded the overall negative market sentiment.

European equity markets largely closed lower on Friday, influenced by the struggles in the technology sector and concerns over elevated energy prices that weighed heavily on investor sentiment.