Opinion

Gold didn't break as a haven. It got sold for cash as hike bets rose

Gold fell below $4,000 as markets priced a 78% chance of a December hike and margin calls hit. In my view that's gold working as cash, and the real story is the Fed's bind.

By Connor O'Brien · Oct 24, 2026, 12:45 PM EDT

Why it matters: Gold's slide is a read on how hard markets think the Fed will lean against oil-driven inflation while AI worries threaten growth.

For information only, not investment advice.

Gold slipped below $4,000 an ounce for the first time since July, as our report laid out, and the obituaries for the "safe haven" are already being drafted. They have the wrong patient. In my view, gold didn't fail as a hedge this week. It did exactly what a metal that pays nothing does when the market starts pricing rate hikes and a selloff sends people hunting for cash. The story isn't gold. It's the Federal Reserve's corner.

What actually happened

Start with the facts. Anadolu Agency reported that gold fell under $4,000 "as a selloff in technology stocks and inflation concerns fueled by rising oil prices weighed on demand." Reuters said the metal was headed for its steepest weekly decline in over four months, as higher energy prices reinforced US rate-hike expectations ahead of next week's Fed meeting. Seoul Economic Daily put it roughly 29% below its January high.

The odd part came Thursday. Kitco News reported that gold plunged as a tech-led equity selloff triggered broader market liquidations, "even as Treasury yields and the dollar weakened." Falling yields and a softer dollar are supposed to be gold's friends. According to Seoul Economic Daily, Berenberg called it the first time since December 2008, in the middle of the global financial crisis, that gold had fallen alongside such a steep drop in Treasury yields.

Gold is the cash machine, not the bunker

Here is my reading. When a selloff turns into margin calls, the first thing people sell isn't what they hate. It's what they can sell fast, at a decent price. Jim Wyckoff of American Gold Exchange said, according to Reuters, that the tech selloff led to margin calls for equity traders and investors, prompting them to sell gold and silver assets. Rich Checkan of Asset Strategies International was blunter in Kitco's weekly survey: investors seeking liquidity "turned to THE most liquid asset on earth… gold."

That's not a broken hedge. That's a working ATM. A haven you can't sell in a pinch would be useless. A haven you can sell in a pinch gets sold in one.

Then add rates. As Anadolu put it, higher interest rates typically reduce the appeal of gold, which pays no interest. Reuters reported that traders largely expect the Fed to hold at its October 27-28 meeting, but hotter-than-expected consumer and producer inflation data bolstered the case for tighter monetary policy later this year. CME's FedWatch showed a 78% probability of a December hike. Rob Haworth of U.S. Bank Wealth Management told Kitco his firm's economists expect a December hike followed by another in March. Wyckoff's summary of that backdrop: "All that's working against the gold and silver market bulls at present."

The best case against me

The strongest objection is that I'm reading a trend into a single bad afternoon. BCA Research's Roukaya Ibrahim told Kitco that Thursday's drop looked like an idiosyncratic event that may have been related to broader cross-asset liquidity pressures rather than a fundamental shift in gold's outlook. Seoul Economic Daily, citing Goldman Sachs, reported that central banks bought an average of 91 tons of gold a month over the past three months, more than five times the pre-2022 average, and that Goldman is keeping its end-2027 target of $5,400 an ounce.

I take that seriously, and on the long-run case Ibrahim may well be right. But notice that her argument and mine agree on the mechanism. A liquidity-driven selloff is my point, not a rebuttal of it. Calling Thursday "idiosyncratic" explains the timing. It doesn't explain why a zero-yield asset should have held up with December hike odds at 78%.

There's also a genuine pull in the other direction. Anadolu reported that doubts about the sustainability of AI investment, a key contributor to US growth, led markets to pare back expectations for further Federal Reserve rate increases, which gave precious metals some support. That is the Fed's bind in one sentence: oil pushes inflation one way while an AI wobble threatens growth the other way.

What to watch

So stop asking whether gold still works. Ask what the Fed does with an inflation problem and a growth scare arriving at the same time. The next data point arrives fast. Reuters noted that the Personal Consumption Expenditures report, the Fed's preferred inflation gauge, lands October 29, the day after the meeting ends. If that number runs hot, gold's bad week will read less like a broken haven and more like the market's first vote on a December hike. That's my read, and it's an opinion, not a trade.

Tags: fed · interest-rates · inflation · markets-moves · energy · ai