Gold, traditionally considered the safest investment (Safe Haven), is currently undergoing a period of significant turmoil, while after soaring to record highs, gold prices have recorded their steepest single-day drop in 12 years. This intense sell-off began on Tuesday and continued into Wednesday, raising concerns among investors, while
Massive Profit-Taking at Record Levels
The sudden panic in the market is primarily attributed to heavy profit-taking by investors. Gold and silver prices had seen an unprecedented surge this year, fueling concerns that a 'bubble' might be forming. Now, those investors who were sitting on substantial gains have rushed to cash in their profits, triggering this price crash. According to Tim Waterer, chief market analyst at KCM Trade, "The profit-taking momentum built like a snowball. "
Magnitude of the Decline in Numbers
On Tuesday, gold prices plummeted by a massive 6. 3%, marking the biggest single-day fall in 12 years. The decline didn't stop there; on Wednesday, gold further dropped by 2. 9% at one point, reaching $4,004. 26 per ounce. Silver fared even worse, while after sliding 7. 1% in the previous session, silver fell over 2% more on Wednesday, settling around $47, while 6.
Impact on Other Markets and US Shutdown
The sharp fall in gold and silver is also impacting other global markets, although stock markets have not shown the same level of panic. US stock markets largely remained unaffected, while Asian markets showed mixed trends, while amidst this volatility, the US government 'shutdown' presents a significant complication. It has caused an economic 'data vacuum' as the Commodity Futures Trading Commission (CFTC) weekly report, crucial for commodity traders, can't be released, while analysts from ANZ Group Holdings Limited estimate that market positions (buying) were excessively built up, ultimately triggering the large-scale sell-off.
Has Gold Lost Its Luster?
The biggest question now is whether gold's bull trend has ended, while most market experts don't believe so. They contend that this price drop is a 'correction,' which is natural after such a significant rally, while according to Fawad Razaqzada of City Index, gold's recent rally was 'extraordinary,' fueled by falling interest rates, continuous buying by central banks globally, and expectations of further monetary easing. He stated, "Markets rarely move in a straight line. It's too early to say the broader bullish trend is over, while " Analysts believe that long-term drivers supporting gold are still intact, and many investors who missed the previous rally might see this dip as a buying opportunity, potentially preventing further market declines.
