Gold at $3,800–4,000: Could an AI spending crash trigger the next bullion rally? Jefferies explains

Gold prices could regain momentum if the artificial intelligence (AI) investment boom suffers a sharp slowdown, potentially weakening the US economy and prompting the Federal Reserve to reconsider its interest rate outlook, according to Jefferies' Christopher Wood.

In his latest GREED & fear report, dated November 5, Wood highlighted that gold has recently traded near the lower end of the $3,800–4,000 per ounce consolidation range identified by him following the metal's strong rally in 2025 and early 2026.

However, this range represents Wood's assessment of recent trading conditions rather than a guaranteed support level or a specific price target.

Why could an AI slowdown benefit gold?

Wood believes the unprecedented AI capital expenditure cycle in the United States may be approaching its peak, with financial markets increasingly reluctant to fund technology infrastructure investments.

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According to Jefferies, AI-related capital expenditure contributed 1.39 percentage points, or 67%, of US real GDP growth of 2.1% in the four quarters to September 2026.

This suggests that any substantial reduction in AI spending could have consequences beyond technology stocks, potentially affecting economic growth and monetary policy expectations.

The report notes that consensus forecasts currently project combined capital expenditure of $1.04 trillion in 2027 by Microsoft, Amazon, Alphabet and Meta.

Wood questions whether financial markets will continue financing investments of this magnitude.

What happens to interest rates?

A credit-driven slowdown in AI expenditure could weaken US economic growth and shift expectations from Federal Reserve tightening towards monetary easing, Jefferies argues.

Such a development could potentially benefit gold because the precious metal does not generate interest income. Lower interest rates generally reduce the opportunity cost of holding bullion.

However, the relationship is not automatic. Gold prices also depend on real bond yields, dollar movements, inflation expectations and investor demand.

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Why is Jefferies cautious about US bonds?

Wood also warns that US Treasury bonds may not provide their traditional protection during a downturn.

The report highlights America's fiscal deficit at approximately 6.2% of GDP, arguing that a recession could worsen government finances and eventually put upward pressure on bond yields.

The US 10-year Treasury yield had already declined 49 basis points from its October 7 peak of 5.36%, reflecting growing demand for bonds amid technology-market volatility.

Wood nevertheless believes such rallies could prove temporary if investors become increasingly concerned about fiscal sustainability.

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What should gold investors do?

For Indian investors, a slowdown in AI spending could strengthen the investment case for gold as a portfolio diversifier, particularly if global equities experience a deeper correction.

However, returns from domestic gold ETFs, gold mutual funds and physical bullion will also depend on the rupee-dollar exchange rate and local pricing.

Investors should avoid treating the $3,800–4,000 range as an assured buying opportunity.

Instead, staggered investments and a disciplined allocation may help manage volatility.

The central question is whether the AI investment boom is merely undergoing a temporary correction or approaching a more sustained slowdown that could reshape global interest rates and demand for safe-haven assets.

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