On Tuesday, gold prices faced their sharpest daily decline in five years, as investors took profits following a surge driven by US interest rate cut expectations and strong safe-haven demand that pushed the metal to a record high the previous day.
Spot gold fell 5.5% to a one-week low of $4,115.26 per ounce by 01.45am EDT (1745 GMT), marking its biggest drop since August 2020.
US gold futures for December delivery dropped 5.7% to $4,109.10 per ounce.
Gold had reached an all-time high of $4,381.21 on Monday, gaining around 60% this year, supported by geopolitical tensions, economic uncertainty, and ongoing central bank purchases.
“Gold dips were being bought up until yesterday, but the sharp rise in volatility at recent highs suggests caution and may prompt short-term profit-taking,” noted Tai Wong, an independent metals trader.
The dollar index climbed 0.4%, making gold more expensive for foreign currency holders.
“Improved risk appetite in the market early this week is negative for safe-haven metals,” said Jim Wyckoff, a senior analyst at Kitco Metals.
Citi analysts indicated that the resolution of the US government shutdown and announcements on the US-China trade deal could stabilize gold prices in the coming weeks.
Spot silver tumbled 7.6% to $48.49 per ounce.
“Silver is struggling today and is dragging the entire metals complex down,” Wong observed.
“It seems we have a short-term peak at $54, and with sentiment shaky below $50, silver may trade sideways with high volatility as long as gold holds steady.”
Elsewhere, platinum fell 5.9% to $1,541.85, while palladium dropped 5.3% to $1,417.25.
Traders are anticipating Friday’s release of the US consumer price index report for September, which was delayed due to the government shutdown. It’s expected to show a 3.1% year-on-year increase. Markets predict the Federal Reserve will reduce interest rates by 25 basis points at its upcoming policy meeting.
Gold, a non-yielding asset, typically benefits in a low-interest-rate environment.
