Precious metals experienced a sharp correction on Tuesday as investors cashed in gains following a historic rally. The spot price of gold plummeted by over 5%, marking its largest single-day decline in five years. Other precious metals also suffered heavy losses: silver fell by approximately 7%, and platinum dropped by 5%.
The downward pressure continued into Wednesday’s trading. The spot price of gold was last seen down by $1.74\%$ at $\$4,053$ per ounce, with silver dropping $0.84\%$ to $\$48.30$.
Market Sentiment Shifts: Trade Hopes & Dollar Strength
According to market analysts, the change in sentiment was primarily triggered by two factors: easing trade tensions between the United States and China, and a corresponding strengthening of the U.S. dollar.
The optimistic outlook was fueled by comments from President Trump on Monday. “I expect we will likely close a very fair deal with Chinese President Xi,” Trump stated. “I think we’ll come to something that will be good.”
“The catalyst appears to be profit-taking in a market that had become significantly overbought in recent weeks,” wrote analysts at ING. “It is clear that market participants were growing increasingly nervous about the sustainability of the rising trend.”
The Bigger Picture: Consolidation After a Record Run
Despite the sharp retreat, the price of gold remains significantly higher, having surged $56\%$ since the start of the year. Just days ago, the metal achieved a record high of $\$4,381$ per ounce. This historic ascent was supported by robust central bank purchases, persistent geopolitical tension, and expectations of an imminent interest rate reduction by the Federal Reserve.
However, analysts at Citigroup, led by Charlie Masi-Collier, caution about an excessive concentration of long positions in the market. They suggest that gold may now be entering a period of consolidation around the $\$4,000$ per ounce level in the coming weeks.
“The long-term factors supporting gold, such as continued central bank purchases and diversification away from the U.S. dollar, may reappear later,” Citigroup analysts noted. “But at current price levels, we see little reason for accelerated buying, as prices have already exceeded the logic of the ‘currency debasement narrative’.”
