(Kitco News) - The gold market has taken a big hit heading into the weekend, with prices breaking convincingly below $4,000 an ounce and falling to their lowest levels in more than a year.

Gold's sharp selloff Friday pushed prices to their lowest level since October 6, 2025, when the precious metal touched an intraday low of $3,884.61 an ounce. The latest decline comes as investors brace for another potentially volatile week, with U.S. employment data and the midterm elections expected to provide fresh uncertainty for financial markets.

According to analysts and traders, there is significant frustration in the marketplace as gold faces substantial selling pressure even as the U.S. dollar and bond yields weaken. (Kitco Global Index shows how much of today's gold move is the dollar versus the gold market itself.) Traditionally, these two factors should be bullish for the precious metal, as they reduce its opportunity costs.

Spot gold last traded at $3,880 an ounce, down 3.5% on the day; prices are down nearly 3% on the week. Silver is experiencing an even bigger drop, with prices falling below $50 an ounce. Spot silver last traded at $48.95 an ounce, down nearly 6% on the day. Silver prices are down nearly 9% since last Friday, marking their worst weekly decline since early June.

Analysts have said that gold has been unable to find any bullish traction, even with lower bond yields, because of broader concerns in the marketplace.

Although the Federal Reserve left interest rates unchanged following its monetary policy meeting Wednesday, the central bank remains committed to bringing inflation down. Looking beyond this week's pause, markets still expect the Fed to raise interest rates in December and through the first quarter of 2027.

Philip Streible, Chief Market Strategist at Blue Line Futures, said that gold will continue to struggle as the ongoing war with Iran keeps oil prices elevated.

“The rule in the markets is that you are supposed to buy the inflation and oil right now is the inflation,” he said.

Streible added that gold performs well when the central bank is forced to cut interest rates to support the economy. However, with the economy expanding by 3.4% in the third quarter, he said the U.S. central bank has plenty of room to raise rates.

“If the economy stays strong the Fed can continue to raise interest rates, which means gold will continue to have a target on its back,” he said.

Simon-Peter Massabni, Head of Business Development at XS.com, said that despite the weakness in the U.S. dollar and lower bond yields, gold is reacting to inflation expectations and the future path of interest rates.

“The decisive factor will be whether incoming economic data prompt markets to reassess the interest-rate outlook, shifting expectations toward a pause in tightening or a resumption of rate cuts. Until then, gold is likely to remain under selling pressure, despite supportive factors that continue to underpin its medium- to long-term outlook,” he said.

“I see three developments that could change the outlook. First, a gradual but clear cooling in the US labor market, reflected in weaker job growth, rising unemployment, and slower wage growth. Second, a sustained decline in inflation, particularly core inflation and price components that capture the pass-through of higher energy costs into broader goods and services. Third, a downward repricing of future interest rate expectations and real yields.”

Looking at gold's technical price action, Waleed Said, Technical Analyst at GivTrade, said that the path of least resistance remains lower. He added that he expects gold prices to eventually test support at $3,800 an ounce.

The latest selloff has also pushed gold significantly below its 200-day moving average, which stands near $4,490 an ounce. With prices trading roughly 13.5% below this long-term trend indicator, the technical picture continues to reflect significant bearish momentum.

“The mechanism matters here. It is not that people are swapping their gold for oil,” Said said. “Higher oil means higher inflation, higher inflation keeps central banks hawkish. On top of that, when the tech selloff hit, people sold gold to cover margin calls elsewhere. Gold is liquid, so it is the first thing that gets sold when people need cash. So in this war gold is not acting as the safe haven people expect. Oil and the dollar are taking that role.”

With all the attention on inflation and oil prices, Naeem Aslam, CIO of Zaye Capital Markets, said that next week's midterm elections could have an impact on the outlook.

Some political analysts have said that if Democrats regain control of Congress, winning majorities in both the House and Senate, it could become more difficult for the Trump administration to continue its war with Iran.

Analysts have said that anything that eases tensions in the Middle East and ends the global energy supply crunch could be positive for gold.

Aslam said he still expects any major dip in gold prices to represent a long-term buying opportunity.

Jeff Sarti, CEO of Morton Wealth, said that he also sees a buying opportunity for gold, as the latest selloff appears to be a technical move.

“DSI sentiment is flashing very bearish, which from a contrarian point of view indicates that this may be a strong entry point,” he said.

Sarti added that he is also not concerned about gold's broken correlation with bond yields over the past week.

“Much of the reason why yields are moderating is that there has been a sentiment shift away from the mega cap tech stocks into the safety net of bonds. But, the counter is that the latest GDP data was strong, implying that bond yields should be higher as opposed to lower. So, I think that there is some short-term noise, tied to stock market sentiment, pushing bond yields lower, as opposed to the assumption that the odds of interest rate hikes are moderating,” he said.

Looking ahead, investors will have plenty of potential catalysts to navigate as financial markets remain volatile. Tuesday's U.S. midterm elections could have significant implications for the ongoing conflict with Iran and the outlook for energy prices, while Friday's nonfarm payrolls report will provide an important update on the health of the U.S. labor market.

With gold struggling to attract safe-haven demand and inflation concerns keeping the Federal Reserve on a tightening path, analysts expect the precious metal to remain sensitive to shifting interest-rate expectations and broader market sentiment.

Economic data to watch next week:

Monday: ISM Manufacturing PMI

Tuesday: US JOLTS job openings, mid-term elections

Wednesday: ADP nonfarm payrolls, ISM Services PMI

Thursday: Bank of England monetary policy meeting, US weekly jobless claims

Friday: US nonfarm payrolls, University of Michigan preliminary Consumer Sentiment survey

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