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Why Is Gold Falling Despite War? Worst October Since 2008

Gold should have thrived on war, falling yields and a softer dollar this week. Instead, the gold price fell below $4,000 and closed its worst October since 2008.

James Whitfield · Published: November 1, 2026 · 12 min read

Gold has had its worst October since 2008. COMEX gold futures opened the month at $4,190.1 and closed on October 30, 2026 at $3,898.9. That is a 6.87 per cent loss, according to XAUUSD Global's month-end review. On Friday alone, spot gold fell 3.5 per cent to $3,880 an ounce, Kitco News reported. That was its lowest level since October 6, 2025.

This matters because it breaks a rule many investors rely on. A war in the Gulf, falling bond yields and a softer dollar should all support gold. In the last week of October, none of them did. Understanding why gold is falling despite war tells you what has to change before the metal can recover.

Editor's note: On October 30 we published Gold Price Forecast This Week: Why Central Bank Buying Keeps a Floor Under Bullion. That piece argued that persistent central bank buying and steadier rate expectations would keep a firm floor under gold, that rate-driven dips had been bought, and that the market looked range-bound into November. That floor did not hold. Gold broke lower on October 30 and finished the month at its 2026 low. This article updates our view. The sections below explain what we underweighted: oil-driven inflation, Fed hike expectations and forced selling.

What happened to gold in October?

Gold fell in four of October's five weeks, according to XAUUSD Global's data on COMEX futures. More than four-fifths of the month's $287.8 loss came in the last eight trading days.

The key dates, as recorded by XAUUSD Global:

Silver fell harder. Spot silver traded at $48.95 an ounce on October 30, down nearly 6 per cent on the day, according to Kitco. CNBC, carrying Reuters, reported that silver slipped below $50 for the first time since November 2025.

The year-to-date damage is now large. Gold futures are down 10.2 per cent in 2026, from $4,341.1 at the end of 2025, according to XAUUSD Global. Kitco reported that spot gold was trading roughly 13.5 per cent below its 200-day moving average, which stands near $4,490.

October 2026 at a glance

Why is gold falling despite war?

The short answer is that the war is working through oil, and oil is working through the Federal Reserve.

Brent crude for December delivery settled at $117.64 a barrel on October 30, up 13.6 per cent for the month, Reuters reported. WTI rose 15.2 per cent. Reuters said traders were bracing for a potential escalation in the Iran war after the US midterm elections, and that an attack on a tanker in the Strait of Hormuz highlighted supply risks. We tracked that move in Oil Ends October Above $100 on Iran War Premium.

Higher oil feeds inflation. Higher inflation keeps central banks hawkish. And higher interest rates raise the cost of holding a metal that pays no yield.

"The rule in the markets is that you are supposed to buy the inflation and oil right now is the inflation," Philip Streible, chief market strategist at Blue Line Futures, told Kitco.

The Fed is the link in that chain. On October 28 the Federal Open Market Committee held the federal funds rate at 3.75 to 4 per cent, according to the Fed's own statement. Two officials, Lisa Cook and Beth Hammack, dissented in favour of a quarter-point hike. The World Gold Council noted that the Fed had already raised rates by 25 basis points in September.

Chair Kevin Warsh made clear the Fed remains committed to bringing inflation back to its 2 per cent target, Kitco reported. He also told reporters that policymakers were not on a set course, according to CNBC.

The data gave the hawks room. US GDP grew at a 3.4 per cent pace in the third quarter, Kitco reported. As we covered in PCE Inflation Holds at 3.6% as Fed Stays on Hold, inflation is not cooling fast enough to take a hike off the table. CME FedWatch put the odds of a December hike at around 75 per cent on October 30, according to XAUUSD Global. That figure was down from 85 to 89 per cent earlier in the month.

"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," Streible said.

Why didn't falling yields and a weaker dollar help?

This is the part that Kitco's Neils Christensen called gold's "frustrating paradox." In the final week of October, the Fed held rates, bond yields fell sharply and the dollar retreated from recent highs. Gold still lost about 3 per cent on the week.

The numbers are striking. The 10-year Treasury yield fell 6 basis points to 4.929 per cent on October 30, CNBC reported. Over the month it dropped about 36 basis points, from 5.293 per cent at the end of September, according to XAUUSD Global. Over the full month, the dollar index barely moved, rising 0.4 per cent.

In a normal market, lower yields reduce the opportunity cost of holding gold. Christensen's explanation is that traders are no longer pricing gold on where yields are today. "Investors are focused on where monetary policy is heading tomorrow," he wrote. Simon-Peter Massabni of XS.com made the same point to Kitco: gold is reacting to inflation expectations and the future path of rates, not to the dollar's daily moves.

There is a second reason the yield signal misled. Jeff Sarti, chief executive of Morton Wealth, told Kitco that much of the fall in yields reflected "a sentiment shift away from the mega cap tech stocks into the safety net of bonds." Lower yields, in other words, were a symptom of stock-market fear, not a sign that rate-hike odds were fading.

Who was selling gold, and where did the haven money go?

Gold was sold for cash. On Friday, October 30, the Nasdaq slid on AI spending worries, and analysts at Commerzbank said the fall in tech stocks may have led to forced selling and margin calls, CNBC reported. We covered that session in Wall Street Ends October With Worst Day Since June.

Waleed Said, technical analyst at GivTrade, described the mechanism to Kitco:

"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."

The safe-haven money that did move went to government bonds. US Treasury yields declined on Friday "as investors moved into safe havens amid a sell-off in equities," CNBC reported. For more on how cautious money splits between the two assets, see our analysis of gold versus government bonds.

Fund flows tell the same story. SPDR Gold Shares (GLD) held 1,041.08 tonnes on October 29, down 14.6 tonnes over the month, according to XAUUSD Global. Physical buyers in Asia were not stepping in either. CNBC reported that Indian buyers were delaying purchases in anticipation of further declines, while demand in China stayed muted.

Why didn't central bank buying stop the slide?

Central banks kept buying. It was not enough to set the price.

The People's Bank of China added 23 tonnes of gold in September, its largest monthly purchase since October 2023, according to the World Gold Council. That took the PBoC's third-quarter buying to 63 tonnes, the strongest quarter since Q3 2023. It also extended China's official buying streak to 23 months. China's official holdings now stand at 2,410 tonnes, the WGC said.

The problem is timing and scale. Central bank purchases are reported monthly and arrive steadily. Forced selling arrives all at once. On a day when leveraged investors need cash, a buyer who adds a few dozen tonnes a quarter cannot absorb the flow. This was the core error in our October 30 forecast. Official demand can put a floor under gold over months. It cannot stop a liquidation within a single session.

Which gold price levels matter now?

With the gold price below $4,000, analysts are watching three levels.

Key gold price levels

Not everyone is bearish. Marc Chandler of Bannockburn Global Forex told Kitco's weekly survey that gold could fall into a $3,750 to $3,850 range. He added that "there does not appear to have been a capitulation trade." In the same survey, 10 of 16 Wall Street analysts expected lower prices in the week ahead. Retail investors in Kitco's online poll leaned bullish, with 53 per cent expecting gains. Commerzbank analysts, quoted by CNBC, said they consider the fall in precious metal prices "to be exaggerated and continue to expect a recovery."

What should gold investors watch this week?

Three events fall in the next ten days.

What This Means for You

The impact. Gold is currently trading as a rate-sensitive, liquid asset rather than as a war hedge. As long as oil keeps inflation high and the Fed leans towards a December hike, the metal is likely to stay under pressure, whatever the headlines from the Gulf.

Pros, for long-term holders:

Cons, for anyone adding now:

If you hold gold as insurance, October is a reminder to size it as insurance: small enough to hold through a 10 per cent drawdown. If you trade it, the key level to watch is whether gold can reclaim $4,000. Follow our Markets coverage for updates through the midterms and Friday's payrolls.

This article is for informational purposes only and does not constitute financial advice.

Sources

Topics: Gold, gold price, precious metals, Federal Reserve, oil prices, Iran war, safe havens, Treasury yields, central bank gold buying, Kevin Warsh

This article is for informational purposes only and does not constitute financial advice.