Gold prices plunge in biggest one-day drop in years. Is the record rally over?

Yahoo

25-04-2025

Gold suffered its biggest one-day drop in nearly four years Wednesday, raising questions about whether a torrid rally driven by anxiety over President Trump's trade policies can continue as the administration appeared to take a more conciliatory approach.
The precious metal had climbed in grand scale this year, culminating in a rise past $3,500 an ounce this week, before support for prices appeared to suddenly give way.
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That raised questions over whether gold has exhausted its run to record highs. That may be the case for now, and there's more room for prices to fall, analysts said — though adding that the hard stop in the rally does not mark a top for gold.
'There is nothing telling us that $3,500 is a top for gold,' said Michael Armbruster, co-founder and managing partner at futures brokerage Altavest. 'The trend is still up and we are now experiencing a normal correction in a bull market.'
In the short run, however, gold may see another '$100 more to [the] downside,' he told MarketWatch.
Gold prices made a sudden shift lower on Tuesday. Gold futures for June delivery GC00 GCM25 had climbed to as high as $3,509.90 an ounce, the highest intraday level on record, before dropping back to settle at $3,419.40, down $5.90, or 0.2%.
Losses for gold intensified Wednesday, with prices down $125.30, or 3.7%, to settle at $3,294.10. Prices marked their largest daily percentage decrease since June 17, 2021, according to an analysis of FactSet data conducted by Dow Jones Market Data.
And gold prices may have quite a bit of room to fall further given the impressive climb.
In a Tuesday note, Jonathan Krinsky, chief market technician at BTIG, said gold was 27% above its 200-day moving average, which is a level only exceeded a few times in the last 30 years.
Krinsky saw that as a sign that gold had entered a 'blow-off phase.' In trader lingo, a blow-off top refers to a sharp, accelerating price increase for an asset that can be followed by a steep decline.
The downside risk for gold is high here, said Krinsky. When gold has moved more than 25% above its 200-DMA, it has always tested its 200-DMA over the ensuing three to six months, he said. The 200-DMA for most active gold futures was at $2,729.81 on Wednesday.
'Parabolic price moves are a rare occurrence in markets, and markets' price history shows such moves can be the final stage of a mature bull-market run,' said Jim Wyckoff, senior analyst at Kitco.com.
He believes that the gold market is 'close to climaxing from a time perspective, but not necessarily from a price perspective.' Prices couldstill shoot higher, 'and possibly much higher in the coming days,' but thebigger daily price moves 'suggest time is running out on this very mature bull-market run,' Wyckoff said.
For now, a drop below $3,200 in the June gold futures contract would 'produce more chart damage,' he added.
A change in the backdrop of the global trade war was among the reasons for the downturn in gold.
'Gold's been riding the trade-war pillar hard, and that's the first leg starting to wobble,' said Stephen Innes, managing partner at SPI Asset Management.
The White House is considering cutting tariffs on Chinese imports in order to de-escalate tensions with Beijing, the Wall Street Journal reported Wednesday, citing people familiar with the matter.
Brien Lundin, editor of Gold Newsletter, said that he had predicted that a resolution of trade tensions would likely spark a price correction in gold and it seems that this, along with Trump's easing up on the pressure on Federal Reserve Chairman Jerome Powell, 'did the trick.'
U.S. Treasury Secretary Scott Bessent told reporters Wednesday, however, that Trump hasn't offered to reduce tariffs on China in a unilateral way.
Meanwhile, the 'fracas' between Trump and Powell was just 'headline helium,' said SPI Asset Management's Innes. It was purely a 'hot-air rally' that pumped the trade for gold, he said, and now that hot air is leaking fast. 'We're seeing the room normalize and with it, gold's parabolic run is getting checked.'
Late Tuesday, Trump told reporters that he has no intention of firing Powell and would like to seem him 'be a little more active in terms of his idea to lower interest rates.' That was a shift from Trump's social-media post last Thursday, when he said Powell's termination 'cannot come fast enough.'
Against that backdrop, the U.S. dollar DXY looks like it's 'starting to find its anchor again — and that's where the real trouble for gold lies,' said Innes. If fading Fed interference risks and whispers of a trade thaw lead to stabilization in the greenback, then the 'need for a panic hedge evaporates.'
Gold bulls 'lose their urgency' and exchange-traded fund flows slow, and those moment chasers are already heading for the exits, he noted.
Gold's drop so far hasn't raised too many worries among gold traders.
'Gold's price correction may have ended this furious, nearly parabolic run, but it doesn't spell the end of this bull market,' said Gold Newsletter's Lundin.
The $150-an-ounce or so drop is big, said Edmund Moy, senior IRA strategist for precious-metals distributor U.S. Money Reserve — but in context, it's only 9% of gold's rise since its rally began in 2022, and 5% of total gold prices.
Moy, who's also a former director of the Treasury Department's U.S. Mint, said gold's latest rally was fueled by the Russia-Ukraine and Israel-Hamas wars, high inflation and now the Trump tariffs, with gold rising from $1,600 in 2022 to more than $3,400 as of Tuesday.
Gold prices were on track to top their inflation-adjusted record high right before their sudden drop this week.
Front-month gold futures had ended Monday at $3,425.30 — almost topping the 'real,' or inflation-adjusted, record settlement high of $3,428.18 from Jan. 21, 1980. On that date, the nominal settlement price, or face value not adjusted for inflation, was $834 an ounce.
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The pace of the gold rally had been 'nothing short of remarkable,' Trevor Yates, senior investment analyst at Global X ETFs, told MarketWatch. He pointed out that bullion has outperformed U.S. equities year to date.
So far this year, gold futures GC00 have climbed 25%, while the S&P 500 index SPX had fallen by about 8.5% as of Wednesday intraday. The rise in gold is even more impressive given its roughly 27% and 13% appreciation in 2024 and 2023, respectively, as the metal has once again delivered on 'providing investors with diversified exposure during times of rising uncertainty and market volatility,' said Yates.
The current pullback in gold prices is driven by 'positioning and flows rather than any fundamental change in our bullish gold thesis,' he said. The recent consolidation in the gold price is 'natural after such a strong rally, with our longer-term bullish thesis remaining very much intact.'
'We continue to see robust physical-market demand, driven by central banks, coupled with rising stagflation concerns and elevated levels of uncertainty supporting the gold price,' Yates added.
This pullback represents a 'potentially interesting entry point for longer-term investors,' he said.
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