Gold Suffers Biggest Drop in Five Years as Safe-Haven Appeal Fades
Record Rally Ends: Easing US Shutdown Fears and US-China Trade Hopes Trigger Sharp Profit-Taking
- Gold prices experienced their sharpest one-day percentage drop in five years, with spot gold falling 5.5% from a recent record high.
- The decline was primarily driven by fading safe-haven demand due to renewed optimism in US-China trade negotiations and reduced fears of a US government shutdown.
- Investor profit-taking after a recent price surge and a stronger US dollar, which made gold more expensive for foreign buyers, also contributed to the sell-off.
- Other precious metals, including silver, platinum, and palladium, also saw significant price drops, mirroring gold's decline.
Gold prices suffered their sharpest one-day drop in five years on Tuesday, plummeting from a recent record high as safe-haven demand evaporated on signs of easing political and trade tensions.
The decline was primarily attributed to investor profit-taking following a period of intense buying, driven by reduced anxiety over the potential for a US government shutdown and renewed optimism regarding US-China trade negotiations.
Spot gold tumbled sharply by 5.5% to hit a one-week low of $4,115.26 per ounce by 1:45 p.m. Eastern Time (5:45 p.m. GMT).
This marks the steepest single-day percentage fall for the metal since August 2020. The price earlier this week had soared to an all-time record of $4,381.21.
Meanwhile, US gold futures for December delivery closed 5.7% lower at $4,109.10 per ounce.
The precious metal had surged about 60% this year, largely on the back of global geopolitical and economic uncertainty, expectations for US interest rate cuts, and robust central bank purchases.
Independent metals trader Tai Wong noted, "The drop in gold just happened yesterday, but the rapidly rising volatility over the past week was flashing a warning sign and may have triggered profit-taking, at least in the short term."
The US Dollar Index (DXY) also contributed to the pressure, rising 0.4% and making dollar-priced bullion more expensive for buyers using other currencies.
"Higher risk appetite in the broader markets earlier this week is a negative signal for the safe-haven metal," commented Jim Wyckoff, senior analyst at Kitco Metals.
Analysts at Citi suggested the ongoing US government shutdown is likely to conclude, and an announcement of a US-China trade deal could put further downward pressure on the metal, potentially pushing the price towards $4,000 per ounce in the coming weeks.
Other precious metals mirrored gold's move:
- Spot silver crashed 7.6% to $48.49 per ounce.
- Platinum fell 5.9% to $1,541.85.
- Palladium dropped 5.3% to $1,417.25.
Investors are now turning their attention to the delayed US September Consumer Price Index (CPI) report, due for release on Friday, with markets also pricing in a likely 0.25% interest rate cut from the US Federal Reserve next week.
Morning Update (Wednesday, Oct 22, 2025)
Spot gold stabilised in Asian trade, virtually unchanged at $4,124.75 per ounce in Singapore after Tuesday's major sell-off. The metal, which saw its biggest intraday slump in over 12 years (a 6.3% dip), along with silver, is consolidating as investors take a breather from what technical indicators had flagged as an overheated, overvalued rally.
