Gold has finally cracked. After months of relentless gains, the metal tumbled more than 6% on Tuesday, its biggest single-day fall in over a decade, as the record-breaking rally came to a screeching halt.
Spot gold, which hit $4,381 an ounce on Monday, plunged as much as 6.3% to $4,082 before finding some footing later in the session. The violent move came after weeks of “stair-stepping up” action, culminating in today’s sharp “elevator down,” with traders warning that a correction was long overdue.
The metal has soared nearly $1,000 in just six weeks, fuelled by central bank buying, dollar weakness, and safe-haven demand amid US-China trade tensions. But with prices stretched to historic levels, the sell-off was always lurking in the background.
Tuesday’s drop was triggered by signs of a thaw in trade tensions, a stronger US dollar, and the lack of updated futures positioning data due to the ongoing US government shutdown. The absence of fresh insights into speculative positioning may have amplified volatility.
The seasonal boost from India’s gold-buying period is also fading, with demand cooling as the wedding season begins. Retail investors had been queuing outside gold shops across Asia, Japan, and Australia during the past weeks, while global ETF inflows hit record levels, $26bn in September alone, adding fuel to the earlier rally.
Even with today’s sell-off, gold remains up more than 50% this year, underpinned by central bank demand, retail interest, and continued ETF buying.