Gold prices dropped sharply on Tuesday, snapping a record-setting rally as investors booked profits and the U.S. dollar regained strength. Spot gold fell nearly 5% in its steepest one-day slide since 2020, cooling off after months of surging gains that had pushed the metal to all-time highs above $4,300 an ounce, according to Reuters.
The selloff, analysts say, reflects a mix of technical and sentiment-driven factors rather than a shift in gold's long-term outlook. After a stunning rally, the yellow metal is down nearly $90 per ounce, with the correction largely driven by profit-taking and overbought conditions in futures markets, according to analysts at FXStreet.
A key catalyst behind the move has been the strengthening U.S. dollar. As the greenback advanced about 0.4% on Tuesday, gold became more expensive for holders of other currencies, reducing global demand. Traders said the dollar's rebound is putting clear pressure on commodities across the board.
The easing of safe-haven demand also contributed to the decline. With geopolitical tensions subsiding and economic sentiment improving, some investors rotated out of defensive assets like gold and back into equities. Analysts noted that traders saw less urgency to hold gold as a hedge amid easing trade and inflation concerns.
Technical analysts warned that the market was ripe for a pullback after consecutive weeks of gains. Overbought signals and record speculative positioning made the metal vulnerable to a rapid correction. The retreat has already erased a portion of the October gains, though gold remains up significantly year-to-date.
Some investors believe the downturn could mark a short-term peak. Billionaire bond investor Bill Gross said the latest slide might indicate "the top may be in," though he and others acknowledged that gold's long-term fundamentals — including central bank buying and persistent inflation — remain supportive.
The broader market context also played a role. The so-called "debasement trade," which has driven demand for hard assets like gold and bitcoin, lost some steam this week as risk appetite improved. Meanwhile, global central banks have signaled a more cautious approach to future rate cuts, which could strengthen the dollar further and weigh on gold.
Despite Tuesday's plunge, analysts do not see the metal's rally as over. Goldman Sachs maintained its forecast for gold prices to rise through mid-2026, citing continued inflation concerns and geopolitical uncertainty. For now, the correction looks more like a pause than a reversal — a reminder that even the most resilient bull runs need to catch their breath.
