Margin calls magnified gold's drop to a one-year low as Fed hike bets weighed

Should forced selling from margin calls have played a significant part in Friday's action, a portion of the drop may be reversed once leveraged positions unwind — that is the basis of Commerzbank's recovery call. That puts technology shares in an unusual position as a short-term driver for bullion: fresh AI-driven losses in equities could bring further liquidation, whereas steadier stocks would ease the strain. Oil still carries the greater weight. Across the Iran war, gold has typically declined when the conflict escalates and gained when tensions cool, since crude feeds expectations of Fed tightening. A dip in crude on Monday amid Qatar-brokered negotiations could therefore help, while fresh strikes on Gulf shipping would work against it. December rate-hike expectations face their next test with US employment figures on 6 November and inflation numbers on 10 November.

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Earlier:

• Gold price analysis today: Is the sharp selloff creating a buying opportunity or another trap?

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Friday's slide reflected selling of bullion to make good on losses in other markets rather than a breakdown in its safe-haven role, even as the oil-driven Fed risk that has weighed on the metal for the whole year lurked in the background.

Summary:

• Bullion dropped more than 3% on Friday to its weakest level in a year, trading under $3,900, and has fallen roughly 30% from its record high.
• Commerzbank attributed the sharp tech-stock slide to potential margin calls and forced selling of safe-haven assets, saying it expects precious metals to bounce back.
• Oil's climb, firmer US inflation and stronger December Fed hike expectations also pressured prices, after the Fed held rates with two officials backing an immediate increase.
• Earlier in the week, Commerzbank said bullion was slipping even while rate expectations softened, indicating other forces were in play.
• Commerzbank has maintained that gold's sensitivity to oil and Fed expectations will keep it under pressure until the Strait of Hormuz is reopened.

Friday's drop in bullion to a one-year low was driven as much by equities as by the metal's own dynamics, according to analysts who cited forced selling while investors sought cash to cover tech losses.

The metal fell more than 3%, dropping below $3,900 per ounce, its weakest level in a year and about 30% off its record peak. The slide happened alongside a steep fall in technology shares, with uncertainty growing over whether heavy spending on artificial intelligence would pay off.

Commerzbank analysts wrote in a note, as Reuters and CNBC relayed, that the slide in tech stocks on Friday may have prompted both margin calls and forced selling of haven assets including bullion. The same note conveyed an expectation that precious metals would rebound. During margin calls, leveraged players usually sell their most liquid holdings, and gold — after a sustained run earlier this year — stood out as a natural candidate.

More strident commentary says the plunge had no connection to fundamentals. That is an overstatement. Elevated crude prices and sturdier US inflation readings bolstered the view that interest rates would remain high, which dents the appeal of non-yielding gold. The Federal Reserve kept rates between 3.75% and 4.00% last week, with two policymakers preferring an immediate hike, and traders now assign a solid probability to a December increase. Media coverage has attributed a probable amplifying role to forced selling, rather than treating it as the only trigger.

Commerzbank's own work adds a degree of subtlety. Earlier in the week, its analysts observed that gold had slipped under $4,000 again even though US rate expectations softened and real yields fell, and they said the move was not set off by a shift in rate outlook. Other strains therefore appeared to be present well before Friday's sharp tech selloff.

The latest move matches a wider tendency Commerzbank has pointed to since the Iran war began. Instead of gaining as a haven, gold has usually declined as the conflict escalates and advanced as tensions recede, with pricier oil lifting inflation and Fed hike expectations. In June, the lender trimmed its end-2026 projection to $4,800 from $5,000, left its end-2027 target at $5,200, and argued that bullion's structural underpinnings, such as rising government debt, were intact and that a recovery depended on an easing of the oil shock.

Over the near term, two factors could decide the next move: whether the tech sell-off extends and forces further liquidation, and whether progress toward reopening Hormuz brings crude prices down and, in doing so, relieves pressure from the Fed.