Gold falls 3.3% to $3,899, its lowest close in a year, as silver sinks 5.9% and bond yields fall

Gold futures settled at $3,898.90 an ounce on Friday, Oct. 30, down 3.3% from $4,031.40 on Thursday, according to Yahoo Finance data. That is the lowest close in the roughly 260 sessions we checked, and it leaves the metal 6.9% lower for October (from $4,186.70 on Sept. 30) and 26.7% below the Jan. 29 settlement of $5,318.40.

Silver fell harder, 5.9% to $49.10 from $52.19, and the main gold ETF, GLD, closed at $355.78, down 3.5% on the day.

What did not cause it

When gold drops, the standard explanation is rising interest rates or a stronger dollar, because gold pays no income. Friday does not fit that:

Yields and the dollar both slipped while gold and silver fell sharply, on the same day the S&P 500 fell 1.8%. We have not found an official or company source that explains Friday's metals move, and we will not guess at one. One pattern is consistent with the data: on a day when stocks tumble, investors sometimes sell winners to raise cash, and gold was a large winner in January. That is a possibility, not something we can show.

The rate backdrop

The monthly picture is a different matter. On Oct. 28 the Fed held its target range at 3.75% to 4% with two dissents in favor of raising rates (see our decision story), and BEA data on Oct. 29 showed core PCE inflation at 3.1% (see our GDP and PCE report). Talk of a rate hike is bad for gold over weeks. Several outlets say hike expectations have firmed, but we could not verify a specific market probability, so we do not quote one.

Where it stands now

Gold bounced to $3,911.10 in early Monday trading in Asia on Nov. 2, up 0.3%, and WTI crude futures eased to $100.88 from $104.12 as Iran talks continued (see our War Room report). These are thin Sunday-evening prices and can reverse.

What it means

• Jewelers and coin dealers: a lower metal price lowers replacement cost on new inventory, but not on stock bought at higher prices. Check what you paid.
• Businesses holding gold or silver as a reserve: a 26.7% drop from the January record is a drawdown to report plainly in your books.
• Industrial users of silver: silver at $49.10 is a 5.9% cut in one session.

What to watch

• Whether gold reclaims $4,000, the level some analysts call a threshold. That is analyst commentary, not a data point.
• Friday's October jobs report: forecast 65,000 jobs, unemployment 4.2%, per our calendar.
• Tuesday's midterm elections and the Doha talks on Iran, both listed in our Nightcap.

Sources: Yahoo Finance daily settlements and closes; U.S. Treasury daily par yield curve. Gold, silver and crude are the front-month futures series quoted by Yahoo (GC, SI, CL), which roll between contracts. Chart: gold chart. This is market information, not investment advice.