Gold Outlook: $3,900 Gives Way — Can Gold Find Its Footing?

Gold staged a brief rebound last week before selling accelerated, with bears taking control of the market. The Federal Reserve maintained its hawkish stance, while US GDP and PCE inflation data reinforced expectations of further rate hikes. Meanwhile, the technology stock sell-off raised concerns about market liquidity, and selling pressure intensified as gold broke below key support levels. Together, these factors kept gold under pressure.

Markets face a packed calendar this week, with the US midterm elections, a series of employment reports and another round of tech earnings. Shifts in interest rate expectations, the US dollar and market deleveraging pressures could collectively shape gold's near-term direction.

Looking at the XAUUSD daily chart, gold initially rallied last week before reversing course. Prices found support around $4,000 early in the week, prompting bulls to test the upside.

However, selling pressure intensified in the second half of the week. Gold plunged around 3.6% on Friday, breaking below both $4,000 and $3,900 and briefly touching $3,870, its lowest level in more than a year.

As gold broke through successive key support levels, some stop-loss orders may have been triggered, amplifying the decline. The 14-day RSI is approaching oversold territory, while the technical picture remains decidedly weak.

In the near term, $3,900 is the first resistance level bulls need to reclaim. If gold can regain and hold above this level, the next area to watch is $3,940–$3,960, followed by $4,000. A further break above these resistance levels would be needed to ease recent downside pressure and create room for a more sustained technical recovery.

Conversely, last week's low around $3,870–$3,880 will be the first key support zone to watch for signs of stabilisation. If prices continue to fall, the next levels to watch are $3,850 and $3,800.

Last week, the Fed left interest rates unchanged, although two policymakers supported an immediate 25-basis-point hike, highlighting hawkish divisions within the committee. The policy statement emphasised that the US economy continued to grow strongly and inflation remained elevated, suggesting that the tightening cycle may not yet be over.

Subsequent US economic data reinforced this view. Third-quarter GDP expanded at a seasonally adjusted annualised rate of 3.4%, beating market expectations, while core PCE inflation reached 3.1% year on year in September. In other words, the US economy remains resilient, but progress on bringing inflation down has been slow.

With oil prices also remaining elevated, markets increased their bets on a December rate hike, with the implied probability now above 70%. For non-interest-bearing gold, a persistently strong US dollar and elevated real yields could keep the opportunity cost of holding the metal high, limiting its recovery potential.

Liquidity pressures stemming from the technology stock sell-off are another important factor.

Last Friday, Intel shares plunged nearly 29% in a single session, while the Nasdaq and semiconductor stocks came under significant pressure. Major technology names, including Alphabet and Amazon, also faced selling.

As markets reassess the enormous capital expenditure, financing costs and return prospects associated with AI infrastructure, traders have begun adjusting their risk exposure. Some may be selling highly liquid assets such as gold to meet margin calls or boost cash reserves. Meanwhile, safe-haven flows have favoured US Treasuries, pushing yields lower.

Whether gold can stage a sustained rebound will therefore depend not only on whether Treasury yields decline, but also on whether rate hike expectations ease and broader market de-risking begins to subside.

Overall, gold continues to face the dual headwinds of rate hike expectations and market deleveraging. This week's US midterm elections, tech earnings and October nonfarm payrolls report will provide important clues as to whether prices can stabilise.

The US midterm elections take place on Tuesday. Prediction market pricing suggests that the possibility of Democrats gaining control of both the House and Senate is drawing attention, potentially creating a divided government with Republicans holding the White House and Democrats controlling Congress.

A shift in congressional control could influence future fiscal spending and tax policy, potentially changing market expectations for the fiscal deficit and Treasury supply. If expectations of easing fiscal pressures push longer-term Treasury yields lower, gold could find some support. However, if reduced political uncertainty boosts risk appetite and strengthens the US dollar, gold's upside could remain limited.

Tech earnings and the nonfarm payrolls report may have a more direct impact on gold.

Apple, Palantir and AMD are among the companies reporting earnings this week. Traders will be watching not only quarterly profits but also management's outlook for AI demand, capital expenditure and future cash flow.

If earnings deepen concerns about AI investment returns and financing pressures, technology stocks could face further selling, potentially triggering spillover pressure on gold through deleveraging. Conversely, if results and guidance ease market concerns, gold may be better positioned to benefit as liquidity pressures subside.

On the economic calendar, Wednesday's October ADP private-sector employment report, Thursday's initial jobless claims and Friday's nonfarm payrolls report will help markets assess changes in labour demand.

Markets expect nonfarm payrolls to rise by 65,000 in October, well above the previous reading of 29,000, while the unemployment rate is expected to remain unchanged at 4.2%. If job growth meets or exceeds expectations and wage growth remains resilient, expectations for a December rate hike could strengthen, pushing the US dollar and real yields higher and weighing on gold.

Conversely, if employment growth continues to slow and unemployment rises, gold could find room for a temporary rebound. However, if weaker employment data also trigger a broader sell-off in risk assets, gold may remain vulnerable to liquidity-driven selling pressure.