According to news on October 22, COMEX gold futures fell 5.07% to US$4,138.5 per ounce; spot gold fell 5.18% to US$4,130.41 per ounce. It once hit the largest single-day decline since April 2013. COMEX silver futures fell 6.27% to US$48.16 per ounce; spot silver fell 7.16% to US$48.705 per ounce, hitting its largest intraday drop since 2021.
Dollar rebounds and risk appetite picks up
The market generally believes that this round of decline is closely related to the rebound of the US dollar and the phased recovery of risk sentiment. The U.S. dollar index rose 0.4% that day, making gold less attractive to non-dollar holders; at the same time, investors’ risk appetite increased, quickly cooling the demand for safe havens.
Jim Wyckoff, senior analyst at Kitco Metals, said that the overall market sentiment turned optimistic at the beginning of this week, putting pressure on safe-haven metals. Citigroup’s report believes that as the outside world expects that the U.S. government shutdown may end and trade frictions are expected to ease, gold prices may fluctuate at high levels in the next two to three weeks.
This round of gold’s rise began at the beginning of the year and has repeatedly reached new highs driven by geopolitical risks, rising expectations of interest rate cuts, and continued central bank buying. In the past two months alone, the cumulative increase in gold prices has exceeded 25%, and the annual increase is approximately 56%, which is expected to refresh the annual record since 1979. With the end of the Diwali gold buying season in India and the increase in leverage positions, the callback pressure was quickly released.
Nicky Shiels, head of precious metals strategy at MKS PAMP SA, said: “The market is showing signs of a bubble, and the main catalyst is extreme overbought conditions – this rally is cooling down. The fact that it jumped $1,000 in six weeks shows that gold prices are significantly overvalued and that we are at irrationally high levels.”
Short-term fluctuations may continue
Some institutions believe that this round of decline is more like a phased correction in a long-term strength. Sam Stovall, chief investment strategist at CFRA Research, believes that gold has risen too fast before, and the dollar’s rebound has become a catalyst for investors to take profits, but the mid- to long-term upward support remains solid.
Lauren Goodwin, an economist at New York Life Investments, mentioned that continued buying by central banks remains an important support for gold prices. Since global geopolitical risks intensified in 2022, many countries have accelerated the pace of de-dollarization. This structural trend is “difficult to reverse in the short term.”
Analysts believe that in an environment where risk aversion and interest rate cycles are intertwined, gold fluctuations may continue. In the short term, the trend of gold prices still depends on two key factors: first, whether the Federal Reserve’s interest rate cuts during the year proceed as expected; second, whether geopolitical risks heat up again. If demand for safe havens regroups, gold may resume its upward trend; conversely, if the macro environment stabilizes and the U.S. dollar remains strong, the room for gold price adjustment still needs attention.
