The Middle East
Gold was subjected to a sharp selling wave during the week ending October 23, as its prices fell below $4,000 per ounce for the first time since mid-July, with escalating fears of continued inflation and increasing bets on the possibility of raising US interest rates again before the end of the year.
The decline came at a time when geopolitical tensions were supposed to support demand for the metal as a safe haven, but the rise in oil prices and the wave of selling in stock markets prompted investors to reduce their positions and reap liquidity.
Gold fell in spot transactions by about 4 percent during the week, recording the worst weekly performance since June, after touching the level of $3,975 per ounce on Friday, before trading near $4,000. US gold futures contracts for December delivery closed at $4,007.90 per ounce, down 1.3 percent in Friday’s session, according to data reported by Reuters.
The decline was not the result of a single factor, but rather came with the intersection of a group of pressures, most notably the rise in energy prices, changing monetary policy expectations, and a decline in investors’ appetite for risk, in addition to the liquidation of investment positions. Gold’s recent movement has also raised the question of its ability to maintain its appeal as a safe haven when markets are under pressure that prompts investors to sell assets to provide liquidity.
Oil brings inflation fears back to the forefront
The rise in oil prices was one of the most prominent factors that put pressure on gold during the week. Brent crude rose to its highest level in more than five months, amid fears of supply disruption after Houthi militia attacks on oil facilities in Saudi Arabia.
These developments have brought the risks of rising energy costs back to the forefront of markets, at a time when investors are awaiting the path of US inflation and the ability of central banks to continue to ease monetary policy.
The importance of rising oil for gold is that it may raise transportation and production costs and increase inflationary pressures, which reduces the chances of a rapid reduction in interest rates, and even enhances the possibility of tightening monetary policy if inflation continues above target levels.
Gold usually benefits from falling interest rates or lower real returns, because the metal does not generate a periodic return. However, when interest expectations and returns on competing assets rise, the cost of holding it increases compared to bonds and instruments that provide a return.
Stronger-than-expected US inflation data, coupled with higher energy prices, have reinforced market bets on the possibility of the Federal Reserve raising interest rates in December. While markets were widely expecting rates to be fixed at the October meeting, attention turned to the central bank’s tone and signals regarding the coming months.
A wave of stock selling increases pressure
Along with oil and interest, the sharp decline in technology stocks contributed to accelerating gold’s losses. The sell-off in stock markets prompted some investors to provide liquidity to cover margin calls or reduce risks in their portfolios, which led to the sale of other assets, including gold.
This movement shows that demand for safe havens does not always lead to an immediate rise in their prices. During periods of market turmoil, investors may be forced to sell gold, even as risks escalate, if their need for liquidity is greater than their desire to hold defensive assets.
Gold’s decline, coinciding with a decline in some bond yields and the weakness of the dollar during part of the selling wave, also showed that the metal’s movements were not linked to just one factor; Interest expectations overlapped with the process of liquidating investment positions and technical factors.
Have central bank sales put pressure on prices?
Questions about the reasons for the decline in gold were not limited to oil prices and interest rates; Central banks’ movements between buying and selling also emerged. Available data indicate that some official institutions reduced their holdings, but the picture was not uniform, and there is not sufficient evidence to confirm that these sales were the main driver of the decline during the week.
Russia continued to sell part of its gold reserves. Data published by the Central Bank of Russia showed that its holdings declined by about 6.2 tons in September, reaching 2,264 tons, the lowest level since the end of 2019. Thus, Russia has reduced its holdings by about 62 tons since December 2025, in light of financial pressures related to financing the budget deficit.
Official gold sales can increase the supply available in the market and put pressure on prices if they coincide with weak investment demand. However, its impact depends on the volume of quantities sold and the timing of their release on the market, and on the ability of demand from investors and other central banks to absorb the additional supply.
In contrast, China was not a seller of central banks, but rather continued to increase its reserves. According to World Gold Council data issued in October, the People’s Bank of China added 23 tons to its holdings in September, which is the largest monthly increase since October 2023. These purchases raised the total that China has added since the beginning of the year to 103 tons, bringing its official holdings to 2,410 tons.
These numbers reveal the different orientations of central banks. While Russia resorted to selling gold as part of financing-related operations, China continued to strengthen its reserves of the metal. Therefore, it is not correct to interpret the recent decline as the result of a unified selling wave by central banks. Rather, sales should be placed within a broader picture that includes official and investment demand and global economic developments.
What do the market forecasts say?
The short-term outlook looks more cautious after gold broke the $4,000 level. The continued rise in oil prices, the issuance of strong inflation data, or the Federal Reserve adopting a more stringent tone may keep prices under pressure and encourage further selling, especially if expectations of a rate cut decline or the possibility of an increase increases.
Continuing trading below the psychological level of $4,000 may increase technical pressures, with the possibility that some investors will resort to reducing their positions if the metal is unable to recover this level quickly. But this possibility remains conditional on market developments, and does not mean that the decline will necessarily continue.
On the other hand, gold may find support if energy prices calm, inflation fears ease, or economic data shows a slowdown that brings interest rate cut expectations back to the forefront. Any new increase in investment demand or central bank purchases may help limit losses, although these factors do not guarantee an immediate rebound.
Central bank meetings and economic data scheduled during the following week remain pivotal in determining the market direction. Among the most prominent stations are the Federal Reserve’s decision, then the European Central Bank meeting, in addition to US inflation data and growth indicators.
Investors will look in decisions and statements for indicators of whether energy-related price pressures will delay monetary easing or prompt additional tightening.
Has gold lost its appeal as a safe haven?
The recent decline does not necessarily mean that gold has lost its role as a hedging tool, but it shows that this role does not operate in isolation from liquidity conditions and monetary policy. When energy prices rise and interest expectations strengthen, the cost of holding gold may outweigh the demand generated by geopolitical risks. If these factors coincide with a sharp decline in stocks, the metal itself may turn into a source of liquidity for some investors.
In the longer term, central bank purchases, concerns about fiscal deficits and debt, and geopolitical tensions remain factors that may support demand for gold. However, these factors do not prevent sharp corrections from occurring when interest rate expectations change or markets undergo extensive liquidation.
Thus, gold enters the next stage facing a double test: its ability to regain the $4,000 level, and the ability of investment and official demand to balance the pressures resulting from oil, inflation, and monetary policy expectations. Central bank signals and economic data will determine whether the recent decline is a temporary correction or the beginning of a longer period of pressure on the yellow metal.
