Gold prices fell again on Wednesday, a day after posting their biggest one-day drop in over a decade — yet history shows that the plunge is more likely to be followed by a modest move higher.
Gold for December delivery GCZ25 GC00, the most active contract, had rallied 56% for the year through Tuesday’s session. It peaked at $4,398 per ounce in Monday intraday trading as investors searched for safe havens from economic uncertainty, inflation risks and simmering U.S.-China trade tensions.
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Then on Tuesday, the precious metal plunged by 5.7% to end at $4,109.10 per ounce as “gold tourists” — or investors who bought the precious metal on a “fear of missing out” trade — got squeezed out and money managers rushed to sell in order to protect their gains, according to Marc Chandler, chief market strategist and managing director at Bannockburn Capital Markets.
That one-day decline was the biggest in 12 years. Gold futures then fell another 1.1% to settle at $4,065.40 Wednesday.
The retreat has raised the question of whether gold has topped out or is just experiencing a long-overdue correction, said Fawad Razaqzada, market analyst at StoneX, in a note Tuesday. “I guess time will tell,” he said.
Read: Gold logs its biggest one-day selloff in years. Is it a bump in the road or have prices topped out?
But a look at previous big daily declines for the precious metal — those of 5% of more — shows that drops like this one may not have a lasting effect.
An analysis of most active gold futures conducted by Dow Jones Market Data shows that after daily declines of 5% or more since May 24, 2006, prices on average traded about 1.82% higher a month later. The biggest percentage rise was 15.46% a month after a 7.3% fall on June 13, 2006, while the biggest loss was 7.76% a month after a 5.4% fall on May 24, 2006.
“Gold and silver should not be expected to go up in a straight line,” Stefan Gleason, president and chief executive officer at Money Metals Exchange, told MarketWatch. Corrections like the one seen this week are “healthy and helpful,” he said. “Bull markets climb a wall of worry.”
Questioning the debasement trade
Gold prices dropped as skepticism swirled around the precious metal’s role as a hedge against the U.S. dollar in one of 2025’s most popular trading strategies, known as the debasement trade. It’s premised on the view that the dollar’s value is poised to deteriorate, prompting investors to rely on gold as an alternative asset.
