Gold prices tumbled 3.37% on Friday, mirroring the sharp decline in U.S. stocks as the S&P 500 posted its worst day since June. Spot gold dropped to $3,884.90 per troy ounce by 4:07 p.m. ET, shedding $135.60 in value. The S&P 500 closed down 1.8% at 7,580.07, while the Nasdaq Composite fell 2.9% to 25,437 and the Dow Jones Industrial Average lost 1.1% to 51,770.31.
The decline in gold extended a recent downward trend, as the metal had already slipped below $4,000 earlier in the week, hitting $3,999.81 on Oct. 27. The Federal Open Market Committee's decision to keep interest rates steady at 3.75%-4.00% on Oct. 28, with only two members favoring a rate hike, highlighted concerns about elevated inflation. Higher interest rates can make gold less attractive compared to yield-bearing assets.
The simultaneous drop in gold and stocks underscores the metal's mixed role as a safe haven. During broad market selloffs, gold can be pressured as investors seek liquidity, even when protection is the goal. The World Gold Council noted in a review of the 2020 market turmoil that gold may have been sold to raise cash, highlighting its dual role as both a safe haven and a liquid asset.
Friday's market moves serve as a reminder that gold's performance as a hedge can vary, particularly during abrupt shifts in liquidity. While one session does not define long-term trends, the day's losses illustrate the complexities of gold's role in a diversified portfolio.