On Thursday, the gold price suffered a sharp decline, marking the largest single-day drop since July, highlighting the complex situation faced by precious metals. Ahead of the upcoming US election, which may lead to a significant "turning point" in gold prices, gold is being influenced by the factor of a "tug of war".

Adam Koos, President and Senior Financial Advisor of Libertas Wealth Management Group, stated that the sharp drop in gold prices on Thursday "strongly reminds of the delicate balance that gold must deal with". He pointed out, "As US bond yields rise, the attractiveness poses real pressure on gold, especially as we also see risk assets like stocks being hit."Its price has soared to a historic high, closely related to market expectations of interest rate cuts by the Federal Reserve."The attractiveness of US bond yields has brought real pressure to gold, especially as we are witnessing risk assets like stocks being impacted," he added.

He further explained that due to the need for liquidity by investors, even gold cannot be guaranteed safe "in a market risk-averse mode, as the increase in US bond yields also means gold's yield is not high enough."

According to Dow Jones market data, gold futures had just reached historic closing and intraday highs, with a 3.4% increase in this month.

On Thursday, gold for December delivery fell $51.50 on the New York Mercantile Exchange, a 1.8% drop, closing at $2,749.30 per ounce, marking the largest single-day drop since late July.

GoldSeek.com President and Founder Peter Spina stated that the price of gold has been rising month by month. He mentioned that the current price correction is "a small gap in this huge rebound that will reverse in the next few days, or a deeper, longer consolidation, which is difficult to answer."

Spina pointed out that currently "many things are up in the air."

The uncertainty of the election is a "net positive."

Spina stated that the current main focus of the market is the political uncertainty next week, with the US presidential election potentially causing some volatility. Overall, so far, this is a "net positive" for gold, as concerns about uncertain outcomes have led to some safe-haven buying pressure.

He added that there are currently many "political remarks," but no party is "addressing the issues of trillions of dollars," with "as deficits accumulate, national debt interest payments are ballooning."

Election day is November 5th, where regardless of who wins, gold may find opportunities to continue rising.

Koos from Libertas mentioned, "The election may be a major turning point for gold, but it could be different for each candidate."

He said that if the Republican Trump wins, the market may expect policies focused on deregulation and corporate growth, which could strengthen the dollar and put pressure on gold. However, "if these policies reignite inflation concerns or exacerbate international trade tensions, we may see gold supported as investors hedge against uncertainty."

On the other hand, if Democrats and current Vice President Harris win, it may "trigger expectations of increased government spending, which could put pressure on the US dollar, while gold as a safe-haven asset will shine."

He pointed out that, given their different "policy directions" on trade, spending, and regulation, any candidate can easily influence investor sentiment and lead to significant fluctuations in the attractiveness of gold as a hedge tool.

But Koos said, "The bottom line is, this election could be a significant catalyst for the next big rise in gold."

Gold and US Treasury Yields

Other factors affecting the gold market include the unusual relationship between gold and the US dollar and US Treasury yields. In recent weeks, gold has been deviating from its normal inverse relationship with the US dollar and US Treasury yields.

But at least for most of Thursday, gold has restored its usual inverse relationship. The US benchmark stock indexes generally fell on Thursday, while the 10-year US Treasury yield rebounded.

Regarding US Treasury yields, Koos said the trend on Thursday was "textbook." He added, "When US Treasury yields rise, gold struggles to maintain its luster. This reminds the market that even gold cannot escape volatility when the yield of safe-haven assets looks better while risk assets are being sold off."

On a broader scale, in October, despite the strength of the US dollar and US Treasury yields, the price of gold also rose.

Koos said, "This is very unusual, because typically, gold likes to 'shine' when the US dollar weakens, while US bond yields will thrive when both gold and the US dollar weaken."

Looking back in history, he pointed out that this unusual trend does indeed occur. During periods of "escalating geopolitical tensions or significant macroeconomic changes," all three may rise simultaneously, ignoring their usual correlations.

Koos said, a similar situation occurred during the oil crisis of the 1970s, when stagflation and global uncertainty made all three the focus. He said that at that time, both gold and the US dollar rose, but eventually, as a result of inflation pressures and changes in yield curve, their paths diverged again.

Koos said that today, "the constantly changing geopolitical landscape and global de-dollarization efforts may be leading to a similar trend among the three, but this is almost certainly only temporary".

Therefore, if history is any indicator, he added, "this simultaneous rise may mean higher volatility in the future".