Analysts say gold’s historic crash looks less like the end of a rally and more like a mega pause before its next leg up. On Tuesday, the gold price plunged 5.7%, its biggest one-day fall since 2013, erasing $2.5 trillion in value from gold in just 24 hours. Despite the shock, experts note that the drivers behind gold’s record run remain intact – sticky inflation, central bank accumulation, and expectations of U.S. rate cuts.
Rather than marking the start of a bear market, the correction appears to be a healthy reset after a near-parabolic rise that pushed gold to record highs of $4,381 per ounce. The data suggests the market isn’t breaking down – it’s catching its breath.
Key takeaways
• Gold prices fell 5.7% in a day, marking the largest single-session decline since 2013, while silver dropped 9%, its biggest daily fall since the 2020 crash.
• The combined loss in gold and silver market value neared $3 trillion in 24 hours.
• The fall came after a record nine-week rally, during which gold hit an all-time high of $4,381 per ounce.
• Gold’s RSI hit 91.8 – the highest in recorded history – signalling extreme overbought conditions before the selloff.
• Even after the drop, gold remains up more than 55% YTD, supported by inflation, central bank demand, and expectations of rate cuts.
The run-up: When gold and silver hit record highs
Before the crash, gold was in uncharted territory. Prices surged to $4,381.21, fuelled by strong ETF inflows, geopolitical tension, and expectations that the U.S. Federal Reserve would soon begin cutting interest rates. Silver, meanwhile, soared to an 70% YTD gain, its best performance in more than four decades.
Both metals had become the year’s standout performers, far outpacing tech equities and AI-linked stocks. In fact, a Goldman Sachs investor survey found that 25% of institutional investors ranked “long gold” as their favourite trade – higher than “long AI stocks” (18%).
Source: Goldman Sachs
The rally was relentless. Gold had notched nine consecutive weekly gains, only the fifth time in history this had happened. Each of the previous four streaks ended with corrections averaging 13% within two months. According to analysts, the pullback was overdue, and the market finally delivered it.
The drop: When record highs met gravity
Gold’s sharp reversal resulted from several overlapping factors hitting the market at once. After months of strong gains, many traders began taking profits ahead of the long-awaited U.S. CPI release. Speculative long positions had climbed to multi-year highs, leaving gold vulnerable to a selloff. Once major investors started selling, automated and leveraged trades accelerated the decline.
At the same time, a rebound in the U.S. dollar made gold more expensive for foreign buyers, further weighing on prices. Improved global sentiment also reduced demand for safe-haven assets, as optimism grew over potential U.S.–China trade talks following President Trump’s positive comments about reaching a “fair deal” with President Xi.
Seasonal factors added to the weakness, with gold demand in India easing after the Diwali festival. The combination of profit-taking, a stronger dollar, shifting risk appetite, and reduced physical demand created a perfect storm that drove gold prices sharply lower.
The rarity of the move
A 4.5-sigma event means such a large move should only happen once every 240,000 trading days – essentially once in a millennium in statistical terms. In reality, since 1971, gold has seen declines of this magnitude only 34 times out of 13,088 trading days, or roughly 0.26% of the time, according to data compiled by Burggraben Holdings.
Source: BurggrabenH
That makes the October 2025 drop one of the rarest events in modern market history. Yet, paradoxically, it occurred at a moment of maximum optimism – right after gold’s strongest rally since the 1970s.
Inflation remains sticky
Alternative inflation trackers show U.S. inflation rising to 2.6%, marking the fifth consecutive monthly increase despite official data delays from the government shutdown.
The geopolitical backdrop is still fragile. Even as trade tensions ease, global uncertainty persists. Negotiations involving the U.S., China, and Russia – including a potential Trump-Putin summit – could inject volatility back into markets, supporting safe-haven flows.
For traders, this correction offers both risk and opportunity.
The performance figures quoted are not a guarantee of future performance.
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