Gold prices suffered an extraordinary drop after touching a record high only two days earlier. On October 20, gold prices jumped to an unprecedented $4,381.21 per ounce. This jump is an impressive 60% boost for the year. As of early-morning trading on October 22, gold prices were down 5.5%. They closed down at $4,115.26/oz, a one week low.
As of 01:45 a.m. EDT on October 22, spot gold was recorded down 5.5%, while U.S. gold futures for December delivery dropped 5.7% to $4,109.10 per ounce. The correction comes on the heels of a period of extreme market turbulence. In that tumultuous period, investors overreacted to each change in economic indicators and the rising dollar. The dollar index was up 0.4%, which raises the price of gold for holders of other currencies, putting an even bigger dent into demand.
The recent plunge in gold prices has been marked by steep declines in a few other precious metals. Silver fell hard too, down 7.6%, settling at $48.49/oz. At the same time, platinum dropped 5.9% to $1,541.85 and palladium declined 5.3%, closing at $1,417.25. According to experts, silver’s dismal performance has dragged down the whole precious metals market.
Market analysts are pointing to a tide-turning effect of recent volatility on investor sentiment. This resulting shift is the very force that is fueling today’s gold price suppression. Tai Wong noted, “Gold dips were being bought as recently as yesterday, but the sharp jump in volatility at the highs over the past week is flashing caution and may encourage at least short-term profit-taking.”
Jim Wyckoff commented on the broader market context, stating, “Better risk appetite in the general marketplace early this week is bearish for the safe-haven metals.” This outspoken optimism is characteristic of a long-standing trend among investors to pursue riskier opportunities in times of economic changing tides.
The suspense only grows as we wait for the U.S. consumer price index report for September, due next week. Economists expect that to show a 3.1% year-over-year increase. A recent U.S. government shutdown held up the release. Consequently, investors today have less clarity about what future economic conditions will look like and the trajectory of inflation.
Traders are looking gold’s breakout. They’re jointing expecting the market’s reaction to upcoming economic indicators to change as market dynamics evolve.