Gold Prices See Biggest Drop in Four Years... Overheated Rally Stalls Ahead of Trump-Xi Summit

Safe-Haven Demand Weakens on Hopes for Eased US-China Trade Tensions
Dollar Strength and Profit-Taking Accelerate the Decline

The recent surge in international gold prices has come to a halt, marking the largest decline in four years. This rapid cooling of investor sentiment is being attributed to both expectations of easing trade tensions between the United States and China and the growing perception that the market had become overheated.

On the 9th of last month, an employee at the Korea Gold Exchange in Jongno-gu, Seoul, is holding up a gold bar. Photo by Yonhap News

According to the London Bullion Market Association (LBMA) on October 21 (local time), as of 2:21 p.m. that day, the spot price of gold was down 3.4% from the previous day, trading at $4,028.73 per ounce. After reaching an all-time high of $4,391.52 per ounce the previous day, gold prices reversed course and declined, at one point plummeting as much as 3.8% during intraday trading. This represents the steepest drop since 2021.

Analysts point out that the sharp rise in gold prices recently fueled concerns about an overheated market, prompting a wave of short-term profit-taking that accelerated the decline. In addition, the strengthening of the U.S. dollar has increased the relative cost of gold for holders of other currencies, further amplifying the drop.

Demand for safe-haven assets has also weakened. As U.S. President Donald Trump and Chinese President Xi Jinping are expected to hold a summit during the Asia-Pacific Economic Cooperation (APEC) meeting in Gyeongju, South Korea, next week to discuss ways to ease trade tensions, global tensions appear to be subsiding and the preference for safe-haven assets is calming down.

Ole Hansen, commodities strategist at Saxo Bank AS, said, "Traders have become more cautious in recent days due to concerns about a correction and subsequent price stagnation. The true strength of the market is revealed during a correction phase. This time will be no exception, and with underlying buying interest still present, the extent of the correction is likely to be limited."