Gold Takes a Hit After Steady Climb, but Analysts Say Rally May Not Be Over
On Tuesday, after a prolonged upward surge, gold prices took a significant hit, posting their largest single-day percentage drop in over a decade. However, many analysts believe this was a long-overdue sell-off and not necessarily the end of gold’s rally.
“It’s like gold hit an unexpected pothole on what had been a smooth highway,” said Adam Koos, President and Senior Financial Advisor at Libertas Wealth Management Group, on Tuesday. “It’s been cruising along nicely for a while, but every now and then, the market slams on the brakes to make sure the passengers are still awake.”
On Tuesday, international gold prices plummeted, partly due to investors taking profits after a record-breaking rally driven by U.S. rate cut expectations and safe-haven demand.
December gold futures on the New York Mercantile Exchange closed at $4,109.10 per ounce, down 5.7%. According to Dow Jones Market Data’s analysis of FactSet data, this was the largest single-day percentage drop since June 20, 2013. Spot gold prices fell as much as 6.3% intraday, the biggest daily drop since April 2013, before closing down 5.3% at $4,123.85 per ounce.
StoneX market analyst Fawad Razaqzada noted that gold’s record high on Monday followed by a sharp pullback on Tuesday raised questions about whether prices have peaked or are merely undergoing a brief correction.
In a Tuesday report, he wrote, “It was a rough day for precious metals, and given gold’s relentless climb, this sell-off was bound to happen sooner or later. Some might even wonder why it took so long.”
While “currency devaluation trades” and defensive investor sentiment have driven gold’s rise, Razaqzada pointed out that several factors weakened this defensive mood this week, including easing trade tensions, reduced safe-haven demand, a rebounding dollar, and gold investors preparing to lock in profits.
However, Tuesday’s drop may not signal the end of the rally.
Razaqzada said it’s too early to assume the overall bullish trend is over. “While pullbacks are normal, it’s worth noting that many investors missed this rally. They may soon step in to buy the dip, which should cap the downside.”
Even with Tuesday’s decline, gold futures prices are still up nearly 56% year-to-date.
Juan Carlos Artigas, CEO of the Americas and Global Head of Research at the World Gold Council (WGC), said on X Tuesday that while some may view gold as expensive, “that’s not the case when compared to global stock markets.”
He added, “Prices don’t exist in isolation. Value is always relative to the broader market environment.”
Artigas noted that financial markets often see corrections after rapid gains, as gold experienced. In an email comment, he said that while recent gold price performance has been driven by momentum, “we believe the rally is also supported by strong fundamentals, such as rising geoeconomic uncertainty, steady U.S. money supply growth, and lower interest rates.”
He added, “Our analysis shows that the gold investment market is not yet saturated and still has room to grow.”
A WGC chart released Monday showed that gold’s value, represented by the weekly average of the London Bullion Market Association (LBMA) afternoon gold price, remains well below its historical highs since the 1980s relative to global equities, represented by the MSCI World Index.
The WGC report stated, “We still believe gold remains under-held… Supported by constructive fundamentals and increased global liquidity, gold prices have room to rise further.”
Koos of Libertas Wealth Management also noted that the gold sell-off “doesn’t look like the big dump everyone’s been waiting for.” Instead, he said, “it feels more like a recalibration after a long, steady climb.”
“Gold has been rising for weeks, so some profit-taking, or even a shakeout like this, helps clear out short-term speculators before the next potential leg up,” Koos said.
For now, he added, gold’s latest move “feels more like a pit stop than the end of the journey.”