On October 23, the London spot gold price stopped falling and recovered, hitting a low of 4,065.63 US dollars per ounce and then rising. It once rose by more than 50 US dollars per ounce to 4,149.86 US dollars per ounce during the day, an increase of 1.27%.
As of press time, the spot price of London gold was around $4,137 per ounce.
The price of gold jewelry in Laomiao fell by 72 yuan in 2 days
On October 21, the international gold price plunged sharply. The London gold spot price once fell by more than 6%, falling below US$4,100 per ounce, the largest single-day drop in 12 years; the international spot silver price once fell by more than 8%, falling below US$48 per ounce, the largest single-day drop since 2021. On October 22, London gold continued to fall, falling to an intraday low of $4,002.89, barely holding on to the $4,000 mark.
The main precious metal contract in the domestic futures market continued to fall. As of the close on October 23, the main contract of Shanghai gold futures 2512 closed at 942.28 yuan/gram, a decrease of 0.77%. The largest single gram in the past three trading days has fallen by more than 60 yuan. Au99.99 on the Shanghai Gold Exchange closed at 941.21 yuan/gram, down 0.8%.
The price of domestic gold jewelry has also plummeted from around 1,290 yuan per gram. On October 23, Laomiao pure gold was quoted at 1,222 yuan/gram, down 72 yuan/gram from 1,294 yuan/gram on October 21; Lao Fengxiang quoted 1,222 yuan/gram, down 68 yuan/gram from October 21; Zhou Dafu quoted 1,223 yuan/gram, down 69 yuan/gram from October 21.
Why the pullback?
Although the price of gold fell by more than $300 this week, gold’s year-to-date increase is still more than 50%.
“The sell-off is likely to be some form of consolidation, and the decline is indeed large, but we just fell to a one-week low.” UBS commodities strategist Giovanni Staunovo pointed out, “I still think the structural bullish case for gold still exists, but some form of consolidation may be healthy for the metal.”
MKS Pamp analyst Nicky Shiels said: “The market is a bit frothy. The main catalyst is extremely overbought conditions. This wave of rise is maturing.”
A team led by J.P. Morgan strategist Nikolaos Panigirtzoglou believes that the recent drop in gold prices should be attributed to trend-following Commodity Trading Advisors (CTA) taking profits on gold futures contracts. The key observation point is that the physical gold ETFs held by retail investors did not experience significant outflows on October 21, showing that their long-term holding confidence remains solid.
StoneX market analyst Fawad Razaqzada said that considering the previous surge in gold prices, such a correction will come sooner or later. While gains in the precious metal were driven by “currency devaluation trades” and defensive investor positioning, several factors eased that defensive sentiment this week, including cooling trade tensions, reduced safe-haven demand, a rebound in the U.S. dollar index, and gold investors preparing to take profits.
The Office of the Investment Director of UBS Wealth Management issued an institutional view that the sharp decline in gold prices was triggered by multiple factors such as the easing of market risk aversion, the strengthening of the U.S. dollar, technical overbought, and changes in investor positions after the end of the seasonal buying period in India. In addition, the lack of position data from the U.S. Commodity Futures Trading Commission due to the government shutdown further restricted gold prices.
