On October 21 local time, the international gold market plummeted after hitting record highs. Spot gold plunged more than 6% at one point, marking its biggest single-day drop since April 2013. Gold futures for December delivery on the New York Mercantile Exchange closed down 5.7% at $4,109.10 per ounce. The previous trading day, gold prices had just reached a record high of $4,381.
Besides gold, silver also fell sharply. Spot silver closed down 7.6% at $48.49 per ounce, marking its biggest single-day drop since 2021.
Mining stocks were under pressure across the board, with Newmont... (Newmont) fell more than 9%, Harmony Gold (Harmony Gold) and Kinross Gold (Kinross Gold) fell by more than 10%. The Gold ETF (GLD) fell more than 6% throughout the day, marking its biggest single-day drop since April 2013.
The market generally believes that this sharp correction reflects a natural pullback after the previous rapid rise. With gold prices trading at high levels and long positions concentrated, sentiment shifts have been amplified rapidly. Some analysts believe this decline is more of a technical adjustment than a trend reversal.
HSBC Precious Metals Strategist James Steel told CBN reporters that the recent surge in gold prices has been "almost parabolic," with high leverage and concentrated holdings increasing the market's sensitivity to external sentiment. In his view, the medium-term upward trend in gold prices continues.
Dollar rebound and improved risk appetite
The market generally believes that this round of decline is closely related to the rebound of the US dollar and a temporary recovery in risk sentiment. The US dollar index rose 0.4% that day, making gold less attractive to non-dollar holders; at the same time, investors' risk appetite increased, causing safe-haven demand to cool down rapidly.
Jim Wyckoff, senior analyst at Kitco Metals, said that the overall market sentiment was optimistic at the beginning of the week, putting pressure on safe-haven metals. (Citigroup ) The report suggests that gold prices may fluctuate at high levels over the next two to three weeks, as expectations rise for the end of the US government shutdown and a potential easing of trade tensions.
This round of gold price increases began at the beginning of the year, repeatedly hitting new highs driven by geopolitical risks, rising expectations of interest rate cuts, and continuous central bank buying. In just the past two months, gold prices have risen by more than 25%, and the year-to-date increase is approximately 56%, potentially breaking the annual record since 1979. With the end of India's Diwali gold-buying season and the rise in leveraged positions, downward pressure has quickly eased.
Nicky Shiels, head of precious metals strategy at MKS PAMP SA, said: "The market is showing signs of a bubble, with the main catalyst being extreme overbought conditions—this rally is cooling down. The fact that gold has surged by $1,000 in six weeks suggests that it is significantly overvalued and we are at an irrational high."
Short-term volatility may continue.
Some institutions believe that this round of decline is more like a phase of correction within a long-term uptrend. Sam Stovall, chief investment strategist at CFRA Research, believes that gold's previous rise was too rapid, and the rebound of the US dollar became a catalyst for investors to take profits, but the medium- to long-term upward support remains solid.
Lauren Goodwin, an economist at New York Life Investments, noted that continued central bank purchases remain a significant support for gold prices. Since the escalation of global geopolitical risks in 2022, many countries have accelerated their de-dollarization efforts, a structural trend that is "difficult to reverse in the short term."
Analysts believe that gold price volatility may continue amid a complex environment of risk aversion and interest rate cycles. In the short term, gold prices will still depend on two key factors: first, whether the Federal Reserve's rate cuts this year proceed as expected; and second, whether geopolitical risks escalate again. If safe-haven demand re-emerges, gold may resume its upward trend; conversely, if the macroeconomic environment stabilizes and the dollar remains stable, gold may decline. While maintaining its strong momentum, the potential for further price adjustments in gold still warrants attention.
(Article source: CBN)
