- Investors should watch Silicon Valley's AI spending for gold price impacts this year
- AI capital spending added about two-thirds of US GDP growth through September 2026
- AI investment may peak soon, risking a slowdown in US economic growth and rate cuts
Most investors watching gold this year have kept their eyes on the Federal Reserve, US bond yields and the dollar. Christopher Wood, global head of equity strategy at Jefferies, wants them to look at Silicon Valley as well.
In the Nov. 5 edition of his weekly 'GREED & fear' note to clients, Wood makes the case that the next big push for gold could come from a slowdown in AI spending, according to a Business Today report on the note.
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The argument hinges on how much of America's recent growth depends on a handful of technology companies.
By Wood's numbers, AI-related capital spending added 1.39 percentage points to US real GDP growth in the four quarters to September 2026. With the economy growing 2.1% over that period, AI investment accounted for roughly two-thirds of all US growth.
The spending is only expected to get bigger. Consensus estimates cited in the note put the combined capital expenditure of Microsoft, Amazon, Alphabet and Meta at $1.04 trillion in 2027.
Wood doubts the money will keep flowing at that pace. He believes the AI investment cycle may be close to its peak and that financial markets are becoming less willing to fund it.
It is a theme he has been building on for months. In a July note, Wood warned that cheaper Chinese AI models could trigger "massive capital destruction" in the US, Business Standard reported. He flagged then that the AI build-out was increasingly being funded by debt rather than the hyperscalers' own cash. The performance of hyperscaler stocks, he wrote, "should be monitored closely."
Where Gold Comes In
Gold pays no interest, so it tends to lose appeal when interest rates are high and gain appeal when they are expected to fall.
Right now, rates are the main thing holding gold back. The Fed raised rates in September for the first time since 2023, taking its benchmark range to 3.75-4.00%. Markets were pricing in a roughly 76% chance of another hike in December, analysts at precious metals group Heraeus noted on November 2, citing CME Group data. That leaves "monetary policy a substantial headwind for gold," they wrote.
Wood's point is that an AI slowdown could flip that equation. If tighter credit forces companies to cut back on AI spending, US growth would take a hit. Markets would then start to bet on rate cuts rather than more hikes, and that shift could revive interest in gold.
The link is not mechanical. Gold also moves with real bond yields, the dollar, inflation expectations and plain investor appetite, so a weaker US economy would not guarantee higher prices.
ALSO READ: World Bank's Gold Forecast For 2028 Is Almost Exactly Today's Price
Wood also raises a doubt about the asset investors usually run to when growth slows: US Treasuries.
With the US running a fiscal deficit of about 6.2% of GDP, he argues that a recession could widen the shortfall further and push bond yields up rather than down. In that scenario, any rally in Treasuries may not last, which would weaken their case as a hedge.
Where Gold Stands Now
According to Wood, gold has lately been trading near the lower end of a $3,800-4,000 an ounce range that he has been tracking since the rally of 2025 and early 2026. That range reflects his reading of recent trading, not a price target.
Spot gold ended Friday at $4,068.71 an ounce, just above that band. It remains about 24% below its record close of $5,379 on January 29.
For Indian investors, a sharper correction in global stocks would strengthen gold's role as a diversifier. But what they earn on gold ETFs, gold funds or physical gold will also depend on the rupee and on local prices, which carry a 15% import duty.
That also means nobody should read Wood's range as a guaranteed floor. If the AI boom only stumbles rather than stalls, the Fed may stay focused on inflation, and gold's wait could get longer.
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