Gold prices plunged on Tuesday, October 21, marking one of the steepest single-day declines in years, as investors booked profits after the metal’s record-breaking rally in the last session.
According to Reuters, spot gold fell 4.9% to a one-week low of $4,143 per ounce by 11:49 a.m. EDT, its biggest daily drop since August 2020. US gold futures for December delivery also slipped 4.7% to $4,155.
Prices had hit an all-time high of $4,381.21 on Monday, October 20, gaining nearly 60% this year amid economic uncertainty, rate-cut hopes, and strong central bank buying.
Profit-taking and dollar strength drive the fall
Traders said the sharp decline was mainly due to profit-taking following gold’s rapid surge. Tai Wong, an independent metals trader, told Reuters that a “sharp jump in volatility at the highs over the past week is flashing caution and may encourage at least short-term profit-taking.”
A stronger US dollar, which rose 0.4%, added further pressure by making gold more expensive for investors using other currencies. Jim Wyckoff, senior analyst at Kitco Metals, noted that “better risk appetite in the general marketplace early this week is bearish for safe-haven metals.”
Trade optimism reduces safe-haven demand
{{/usCountry}}Trade optimism reduces safe-haven demand
{{/usCountry}}Adding to the drop, hopes of progress in US-China trade talks reduced gold’s safe-haven appeal. Yahoo Finance reported that President Donald Trump said he expected to reach a “very strong trade deal” with Chinese President Xi Jinping when they meet next week in South Korea.
Following this, gold futures (GC=F) slid 1.5% to $4,296.30 per ounce, while spot gold dropped 2.6% to $4,357.35, according to Yahoo Finance. The positive sentiment around trade boosted risk appetite, diverting investor interest away from gold.
Other metals also slide
According to Reuters, silver plunged 6.8% to $48.89 per ounce, platinum fell 5.4% to $1,550.10, and palladium declined 5.1% to $1,425.19. Wong added, “Silver is stumbling badly today and has dragged the entire complex lower.”
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Markets await inflation data and Federal Reserve decision
Investors are now waiting for the delayed US Consumer Price Index (CPI) data due Friday, which could guide the Federal Reserve’s rate decision next week. Economists expect a 25 basis-point rate cut, which could later help gold recover.
For now, however, optimism in global markets, a stronger dollar, and easing trade tensions have taken the shine off the yellow metal’s record-breaking run.
FAQs
1. Why are gold prices down today?
Gold prices fell sharply today due to profit booking after reaching record high due to a stronger US dollar, and hopes of progress in Trump’s trade talks with China.
2. How much did gold prices drop?
According to Reuters, spot gold dropped to $4,143 per ounce, while gold futures fell to $4,155, the steepest daily fall since August 2020.
3. Will gold prices rise again soon?
Gold may recover if the Federal Reserve cuts interest rates next week, as lower rates generally support non-yielding assets like gold. However, short-term volatility is expected.