Gold, silver post steepest declines in over 13 years as rally stalls

It was good while it lasted.

Gold and silver prices plunged Tuesday, marking their sharpest one-day declines in years and halting a months-long rally that had pushed both metals to record highs.

The sudden double drop, attributed to both profit-taking and shifting market sentiment, comes after a period of heightened volatility and sustained investor interest in precious metals.

Gold futures fell $248.70 to settle at $4,087.70 per troy ounce, a 5.7% decline that FactSet data shows is the largest single-day drop for the front-month contract since June 2013. Spot gold also retreated 5.5% to $4,115.26 per ounce, its steepest fall since August 2020. The metal had reached an all-time high of $4,381.21 just a day earlier, capping a rally fueled by expectations of US interest rate cuts, geopolitical uncertainty, and robust central bank buying.

Silver was not spared from the sell-off, with futures dropping 7.2% to $47.45 per ounce to mark its largest one-day dollar loss since September 2011. Spot silver fell as much as 7.6% to $48.49.

'A healthy pullback'

Several market observers pointed to profit-taking as a primary driver behind the abrupt reversal. Peter Cardillo, chief market economist at Spartan Capital Securities, attributed the fallback to investors locking in gains after the extended rally.

“We don’t believe this marks the beginning of a serious correction," Cardillo said. "Instead, we view today’s decline as a healthy pullback.”

Sean Beznicki, director of investments at VLP, sees the moves in gold as "more like a bout of profit-taking than a shift in fundamentals.” He noted that the main drivers for the yellow metal's rally – persistent inflation, central bank demand, and diversification away from the US dollar – remain intact.

Reuters shared one take from Tai Wong, an independent metals trader, who observed that “gold dips were being bought as recently as yesterday, but the sharp jump in volatility at the highs over the past week is flashing caution and may encourage at least short-term profit-taking.”

He also noted that silver’s stumble “dragged the entire complex lower,” with sentiment likely to remain volatile as long as gold prices stay elevated.

Macro factors and outlook

The sell-off coincided with a rise in the US dollar, which tends to make precious metals more expensive for holders of other currencies. Improved risk appetite in broader markets and easing trade tensions between Washington and Beijing also contributed to the pullback.

Technical indicators had signaled overbought conditions, and several attempts by gold to break above $4,400 met resistance, according to analysts.

Despite the day’s losses, many on Wall Street remain bullish on gold’s long-term prospects. Bank of America analysts recently reiterated their positive outlook, forecasting a peak of $6,000 per ounce by mid-2026. Goldman Sachs and JPMorgan have also raised their price targets for the metal, citing ongoing central bank demand and persistent macroeconomic uncertainty.

Investors are currently watching closely for this week's release of the US consumer price index report for September, which was delayed by the federal government shutdown, which is now in its third week. The data, along with the Federal Reserve’s upcoming policy meeting at the end of the month, is expected to provide further direction for precious metals and broader markets.

While Tuesday’s drop has introduced a note of caution, many analysts see the move as a pause rather than a reversal.

As David Morrison, senior market analyst at Trade Nation, put it: “The first major test to the downside [for gold] comes in around $4,000. But it’s also quite possible that this is all we get from the dip and that buyers come back in around $4,200”.