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Gold and silver experienced their steepest single-day drops in years on Tuesday, as a broad market selloff halted a weeks-long rally that had pushed both metals to record highs.
Spot gold tumbled by as much as 6.3% to USD 4,082.03 an ounce, marking its sharpest decline in over 12 years. Silver plunged 8.7% to USD 47.89 an ounce, its worst performance since February 2021.
Several interlinked factors triggered the selloff:
- Improved US-China Relations: Renewed optimism over trade discussions between the US and China, ahead of a scheduled meeting between Presidents Trump and Xi Jinping, has reduced safe-haven demand.
- Stronger US Dollar: A rising dollar has made precious metals more expensive for non-US buyers, dampening demand.
- Technical Overstretch: Gold had entered overbought territory, suggesting the rally had overextended and was ripe for a correction.
- Seasonal Demand Drop: The end of India’s seasonal buying spree further weighed on precious metals.
- Investor Uncertainty: The ongoing US government shutdown has suspended the Commodity Futures Trading Commission’s weekly positioning reports, leaving traders in the dark about speculative activity and increasing market vulnerability.
“Trend-following investors and dealers are locking in gains after a robust rally,” noted Bart Melek, global head of commodity strategy at TD Securities. He emphasized that historical indicators showed the recent surge was unsustainable.
Ole Hansen, commodities strategist at Saxo Bank, warned that the lack of updated positioning data may have encouraged excessive speculative long positions, leaving both metals more exposed to sharp reversals.
Volatility has surged in the market, with many traders hedging their broader portfolios or speculating on further declines. Notably, over 2 million options contracts tied to the largest gold-backed ETF traded last Thursday and Friday — a new record.
Bloomberg strategist Tatiana Darie cautioned that while ETF holdings have yet to reach historical peaks, momentum-driven rallies often reverse. She added that stronger-than-expected US economic data could trigger a deeper correction in gold.
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Silver, which had rallied nearly 80% year-to-date, was also hit hard. The metal’s gains had been fueled by the same macro drivers as gold, in addition to a historic supply squeeze in the London market. On Tuesday, Shanghai Futures Exchange vaults saw their largest daily silver outflow since February, reflecting tightening supply. Meanwhile, New York stockpiles also declined.
As of 11:36 a.m. in New York, gold had recovered slightly but was still down 5.3% at USD 4,126.94 an ounce, while silver was trading 7.1% lower at USD 48.73 an ounce.