Author: Revc, Jinse Finance
On Thursday (October 31), spot gold plummeted $43.50, or 1.56%, after hitting a new all-time high, revealing the volatility of investors' risk-averse sentiment. As gold retreated, the cryptocurrency market and U.S. stocks also experienced varying degrees of turbulence, reflecting investors' uncertainty about the future economic outlook.
Gold: Retreating from New Highs
Gold prices briefly surged to $2,790.11 per ounce, setting a new record high. However, due to the release of strong U.S. economic data, investors chose to take profits at the high levels, causing gold prices to plummet rapidly. According to Bloomberg's analysis, gold recorded its largest single-day decline since July, reflecting the market pressure from robust employment data and the core personal consumption expenditures (PCE) index. The data showed that the U.S. core PCE price index rose 2.7% year-over-year in September, in line with the previous value and exceeding the expected 2.6%. This level of inflation has heightened expectations of the Federal Reserve pausing its rate cuts.
Peter Cardillo, chief market economist at Spartan Capital Securities, said that Thursday's economic data further solidified market expectations of future inflation, leading to a temporary decline in the demand for gold as a safe-haven asset. However, Rhona O'Connell, an analyst at StoneX, pointed out that geopolitical tensions and the upcoming U.S. election remain important factors supporting gold, and the market's willingness to buy gold on dips remains strong.
U.S. Stocks Fluctuate: Tech Stocks Suffer
U.S. stocks also experienced a significant decline on the day, particularly in the technology sector. The Nasdaq index fell nearly 3%, with Microsoft and Meta suffering significant losses of 6% and 4%, respectively, due to concerns over their spending on artificial intelligence. Although Microsoft and Meta's earnings reports exceeded market expectations, investors' concerns about increased future capital expenditures for AI have increased.
Meanwhile, the U.S. Department of Labor reported that the number of initial jobless claims fell to 216,000, the lowest level since May, indicating a strong labor market performance, which has reduced market expectations of future monetary policy easing. Market sentiment has gradually turned more conservative as the U.S. unemployment rate remains low, and investors are concerned about the further erosion of corporate profits by high interest rates.
Cryptocurrency Market: Bitcoin's "Greed" Sentiment
Amid the volatile movements in gold and U.S. stocks, the cryptocurrency market has also experienced a significant correction in the past 24 hours. Bitcoin prices briefly touched $68,830, with over $250 million in liquidations across the network, leading some analysts to believe that the market sentiment has shifted towards "greed" for Bitcoin. Among the major cryptocurrencies, Ethereum has performed relatively weakly, with a 3.16% price decline, indicating that investors are focusing more on Bitcoin. The overall cryptocurrency market capitalization has declined by 1.90%, suggesting that the market is entering a consolidation phase after the previous rally.
The news of Microstrategy's plan to raise $420 million to purchase more Bitcoin has further boosted market sentiment, while the Coinbase CEO's statement that the next Congress will be the "most crypto-friendly Congress in history" also reflects the trend of increasing policy support for the cryptocurrency market.
U.S. Election and Nonfarm Payroll Report: Market Awaits Direction
Behind the synchronized movements in gold, cryptocurrencies, and U.S. stocks, the U.S. election and the upcoming nonfarm payroll report are undoubtedly the dominant factors. Analyst Valencia points out that before the U.S. election on November 5, investors' risk appetite has decreased. Particularly, the market's bet on the competition between former President Trump and Vice President Harris will affect the direction of the financial markets. With the escalation of geopolitical tensions and the uncertainty of the election results, the demand for gold as a safe-haven asset remains strong, and many investors still see it as the ideal asset to hedge against future uncertainties.
In addition, the upcoming release of the nonfarm payroll report (8:30 pm Beijing time on November 1) is also a focus of market attention. It is expected that the October nonfarm employment numbers will decline significantly due to the impact of hurricanes and strikes. If the report meets expectations, it may weaken the market's confidence in the Federal Reserve's continued rate cuts. Investors generally expect the Federal Reserve to pause rate cuts at its meeting in early November.
Summary
The changes in the global economic and political situation have made the linkage effect between gold, cryptocurrencies, and U.S. stocks more apparent. Faced with uncertainties in inflation and the Federal Reserve's interest rate policy, as well as the unresolved U.S. election and geopolitical tensions, investors are seeking hedging opportunities across different markets. After a short-term correction, gold may still maintain its status as a "safe haven", while the cryptocurrency market has shown greater resilience driven by policy and institutional support. U.S. stocks, on the other hand, are more sensitive to the volatility of the technology sector.
