Gold just hit the brakes—hard. On Tuesday (the 21st), gold futures for December delivery closed at $4,109.10 per ounce on COMEX, down 5.7%, marking the biggest one-day percentage drop since June 2013. After setting record highs only a day earlier, the sudden plunge has investors asking: is this just a pit stop, or the start of a long slide?
A Sudden Jolt After a Smooth Ride
"Gold hit an unexpected pothole on a straight road," quipped Adam Koos of Libertas Wealth Management, likening the sell-off to a driver tapping the brakes to check on the passengers. In other words, the rally was cruising, but markets don’t run on autopilot forever.
The sell-off followed weeks of relentless gains, with gold still up nearly 56% year-to-date despite Tuesday’s stumble. That’s a hefty cushion, but it also means plenty of traders were sitting on profits—and some decided it was time to cash out.
Why the Pullback Happened
Analysts point to a cocktail of factors:
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Easing U.S.-China trade tensions, which reduced demand for safe-haven assets.
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A rebound in the U.S. dollar, making gold relatively pricier.
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Profit-taking after a record-setting run.
Fawad Razaqzada of StoneX called it "a major sell-off day for precious metals, inevitable given the previous surge." He added that the real surprise was how long it took for such a correction to arrive.
Still Room to Run?
Despite the drama, many analysts argue the long-term gold bull market remains intact. Razaqzada noted that corrections are natural and may even set the stage for new buyers to jump in. "It’s too early to call the long-term bull trend over," he said.
The World Gold Council’s Juan Carlos Artigas echoed that sentiment, pointing out that gold isn’t expensive when compared to global equities. He highlighted ongoing economic uncertainty, rising money supply, and falling interest rates as strong fundamentals supporting the metal.
The Council also emphasized that gold remains undervalued and under-owned relative to historical benchmarks, particularly compared to the 1980s.
Skepticism Suggests the Rally Isn't Done
Koos of Libertas added that true peaks usually happen when everyone fully believes in the rally. Right now, skepticism still lingers. "This decline looks more like a rest stop than the end of the journey," he said, suggesting the market is simply recalibrating after an overextended run.
The Bottom Line
Gold's biggest one-day drop in over a decade may have rattled nerves, but it doesn’t necessarily spell doom for the rally. With fundamentals still supportive and plenty of investors waiting to "buy the dip," this correction may be less of a turning point and more of a breather.
For now, the trend is still gold's friend—at least until it isn't.