AI and crypto stumble heightens volatility risk for in-demand investment metals

At the index level, the damage is still modest in absolute terms: the Nasdaq 100 future has dropped only a few percentage points from its recent high, and the S&P 500’s retreat is small compared with the year-to-date gains. However, the tone has shifted somewhat with both indices now trading below their 50-day moving averages for the first time since April, signalling that the technical backdrop has deteriorated and that more investors are reassessing risk rather than simply buying the dip.

The combination of elevated valuations, narrow market breadth, circularity in AI investment flows, and heavy concentration in a handful of mega-cap names, alongside warnings from major bank CEOs of a potential 10–20% equity drawdown, has added a layer of near-term unease. Crypto assets have joined the de-risking, with several large-cap crypto-linked stocks and tokens underperforming sharply and showing a tighter correlation with the Nasdaq as some of the same investor base decides to reduce exposure.

For now, the process remains orderly, with the lack of a major spike in volatility allowing highly leveraged accounts to trim positions and raise cash without triggering a full-scale liquidation. That can change quickly if volatility jumps—but it has not done so yet.

Episodes of sharp volatility remain an overlooked link between equity stress and commodity moves. When equities sell off and volatility jumps, volatility‑targeting and risk‑parity strategies must cut exposure, often across all liquid assets. Because these models adjust leverage mechanically based on realised or implied volatility, the resulting reductions hit portfolios broadly, regardless of underlying fundamentals. In practice, this creates a dash‑for‑cash dynamic in which investors sell what is liquid and sizeable rather than what caused the risk. As a result, even fundamentally strong commodity positions can be pulled into the downdraft during periods of rapid deleveraging.

Gold is currently undergoing a prolonged consolidation after an August to October surge saw prices hit a record high near USD 4,400, but from a technical perspective, the market has yet to test levels that would signal a deeper corrective phase or an end to the structural bull trend. However, that does not insulate it and recent in-demand metals from copper to platinum and not least silver from temporary liquidation flows if volatility spikes, or simply if the general level of risk appetite takes a hit—as we have seen in several sessions recently.

The volatility shock in early April remains the clearest recent example. Following a round of surprise U.S. tariff announcements, the CBOE Volatility Index (VIX) almost tripled from around 21% to 60% within three days, while the S&P 500 dropped roughly 15% over the same window. With bond-market volatility also surging, every liquid asset became a candidate for raising cash. Gold fell 6.6% from top to bottom, despite entering the episode with strong bullish momentum. Silver, with its partial dependence on industrial demand, tumbled 17%. Yet both metals recovered rapidly once volatility stabilised. Gold printed fresh highs within a week—an illustration of how quickly fundamentals can reassert themselves once forced flows subside.

The current backdrop still carries the potential for another volatility event, particularly if weakness in AI, tech and crypto deepens and triggers a broader de‑rating of growth assets. That would likely lift volatility and prompt further deleveraging, though recent corrections in precious and industrial metals have already reduced the risk of a sharp, disorderly liquidation episode. These markets remain vulnerable to brief, mechanically driven selling but usually recover quickly once volatility settles, thereby allowing risk appetite to reset.

For gold and other investment metals, the underlying supports remain intact: fiscal uncertainty, sticky inflation, strong central‑bank demand and a gradual drift toward lower funding costs through FOMC rate cuts. Industrial metals continue to draw structural support from deglobalisation, electrification, grid expansion and data‑centre build‑outs, all against a backdrop of persistent underinvestment in new supply. Copper may shed some speculative froth if AI‑linked assets face a more decisive setback, but such moves would reflect positioning rather than any change in the long‑term fundamental story.

Conclusion: Periods of equity-market stress and rising volatility can temporarily distort commodity prices through forced deleveraging, but they rarely alter the underlying trajectory of markets that enjoy robust macro and micro foundations. With corrections so far remaining controlled, the backdrop points to orderly de-risking—unless the tech and crypto downturn accelerates.