Gold prices suffered their steepest drop in more than five years, falling nearly 8% in two days and returning to near $4,000 an ounce after hitting a record high of $4,381 on Monday. The fall came without any specific catalyst, but rather due to selling pressure and profit-taking after a 50% surge since the start of the year.
Analysts have described the drop as a “healthy consolidation” phase after a remarkable surge driven by geopolitical tensions, a Fed rate cut, and a wave of FOMO-driven buying. However, gold’s fundamentals remain strong, supported by central bank demand and low global interest rates.
Global stock markets remained stable despite the gold price jitters. The European STOXX 600 index rose slightly, US and European bond yields fell, while investors awaited earnings results from companies such as Tesla and Netflix. Gold’s fall did not dampen interest in riskier assets as investors expect monetary policy to remain loose.
Market attention now turns to next week's meetings of major central banks including the Federal Reserve, the Bank of England, and the Bank of Japan. The Fed is expected to cut rates by 25 basis points, while a lack of economic data due to the US government shutdown adds to uncertainty about the direction of policy. Meanwhile, Japan is planning a large stimulus package and oil prices rose for a second straight day, reflecting a mix of risks and support for the global economy.
Analysts warn that volatility could continue. If the stock market experiences a major correction, investors may sell gold to cover the margin, as in previous crises.
