Gold extends its slide after biggest one-day drop in 12 years
Gold for December delivery, the most active futures contract, had been one of 2025’s hottest trades. Prices surged 56% this year through Tuesday’s session, peaking at $4,398 per ounce in Monday’s intraday trading as investors flocked to safe havens amid inflation fears, economic uncertainty, and renewed US-China trade tensions, as per a MarketWatch report.
Then on Tuesday, Gold futures sank 5.7% to end at $4,109.10 per ounce, the steepest single-day drop in 12 years, reported MarketWatch. On Wednesday, prices fell another 1.1% to settle at $4,065.40, as per the report.
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“Gold tourists” and profit-taking blamed for the selloff
Market watchers say the sudden reversal was driven by “gold tourists”, short-term investors who piled in on fear of missing out, being forced to sell when prices turned lower. Marc Chandler, chief market strategist at Bannockburn Capital Markets, said money managers rushed to lock in profits after the massive rally, as per the MarketWatch report.
History suggests gold may bounce back
Despite the panic, past data suggests that sharp declines like this one rarely mark the end of a rally. An analysis by Dow Jones Market Data found that after daily drops of 5% or more since 2006, gold prices have, on average, traded about 1.82% higher a month later, as per the report.The biggest rebound came in 2006, when prices rose more than 15% in the month following a 7.3% one-day fall. The worst case was a 7.76% monthly loss after a similar drop that same year.ALSO READ: Social Security ends decades-old program in October — here’s how it impacts you
Analysts call the correction “healthy”
Stefan Gleason, president and CEO of Money Metals Exchange, said these kinds of pullbacks are “healthy and helpful,” as quoted by MarketWatch. He said, “Gold and silver should not be expected to go up in a straight line,” adding, “Bull markets climb a wall of worry,” as quoted in the report.
Dollar remains firm despite gold’s fall
The latest decline has also rattled confidence in the so-called “debasement trade”, a popular 2025 strategy built on the belief that the US dollar’s value would weaken, driving demand for gold, reported MarketWatch.
Some analysts argue that premise is faltering. Chandler noted that the dollar remains overvalued compared with other major currencies. He said, “We’ve seen gold come off sharply in the last few days, while the dollar is firmer. My sense is what the debasement trade misses is that the dollar is overvalued by any measure. A stronger case could be made for the debasement trade if the dollar was cheap, but it’s not,” as quoted in the report.
OECD data supports that view, showing the euro and Japanese yen are more than 50% undervalued against the dollar, while the Swiss franc is the only G-10 currency that’s overvalued — by just over 18%.
The ICE U.S. Dollar Index, which tracks the greenback against six other currencies, hovered around 99 on Wednesday after inching higher since last week. Chandler said that with the dollar still “very overvalued,” this doesn’t really qualify as a true debasement scenario.
Steven Englander, global head of G-10 FX research at Standard Chartered Bank, said investors may be underestimating the dollar’s resilience. In an email on MarketWatch, he wrote that there’s “less room” for the Federal Reserve to cut interest rates than markets expect, which could keep the dollar supported.
Englander also noted that the U.S. economy “may be enjoying a productivity surge,” a factor that tends to strengthen the currency. Additionally, global reserve managers appear “very cautious” about selling the dollar, further limiting downside risks.
FAQs
Why did gold prices crash this week?
Gold plunged due to profit-taking by investors and forced selling by short-term traders after months of gains.
How big was the gold drop?
Tuesday’s 5.7% fall was the biggest one-day drop in 12 years, followed by another small decline on Wednesday.
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