Gold prices extend fall after posting sharpest drop since 2020 on easing U.S.-China trade tensions. What’s next for investors?
Gold prices extended their decline on Wednesday, retreating further after a record-breaking rally earlier in the week, as traders cashed in gains and sentiment improved on signs of thawing U.S.-China relations.
Spot gold slipped 0.4% to $4,109.19 per ounce, following Tuesday’s steep 5% plunge, the sharpest single-day drop since August 2020. The reversal came after U.S. President Donald Trump signaled optimism about striking a “fair” trade deal with Chinese President Xi Jinping during their meeting next week in South Korea, easing some of the geopolitical jitters that had fueled bullion’s surge.
Even after the selloff, gold remains one of this year’s standout assets, up roughly 56% so far in 2025. The metal hit an all-time high of $4,381.21 per ounce on Monday, powered by relentless central bank buying, global uncertainty, and expectations of further U.S. interest rate cuts.
Investors are now turning their attention to Friday’s U.S. consumer price index print for September delayed due to the government shutdown, for more direction on the Federal Reserve’s policy path. Economists in a Reuters poll expect the Fed to deliver a 25-basis-point cut next week, followed by another in December, though opinions remain split on how low rates could go in 2026.
The correction in gold mirrored a steep selloff in silver, which tumbled nearly 7.5% on Tuesday to about $47.12 per ounce. The drop, one of the metal’s biggest single-day declines in recent years, reflected broad profit-taking across precious and industrial metals amid a stronger U.S. dollar, which typically dampens demand for dollar-priced commodities.
What’s next?
The yellow metal is expected to open on a weak note in the domestic market on Wednesday following a 5.5% drop in international spot prices, the steepest since August 2020.
“Prices are likely to correct to Rs 1.22 – Rs 1.23 lakh per 10 gm on Wednesday when the Indian gold market opens. If the prices remain at this level, then the demand upswing that we had noticed during Dhanteras will continue. It is good for the consumers who have weddings in their families as a correction in prices means less pressure on the pockets, ” said Surendra Mehta, national secretary of India Bullion & Jewellers Association (IBJA), told The Economic Times.“Festive demand in India continues to lend strength to prices, though post-festive profit booking may emerge as traders lock in gains. The focus this week will remain on the US CPI and Core CPI data, which could guide market expectations on the Fed’s next rate action. The prolonged US government shutdown has also kept a premium built into gold prices, sustaining its safe-haven appeal. The trading range is expected between Rs 1,25,000 and Rs 1,30,000,” Jateen Trivedi of LKP Securities said.
India’s Multi-Commodity Exchange (MCX) will remain shut during the morning session on Wednesday, October 22, 2025, on account of Diwali Balipratipada. Trading will resume in the evening session from 5:00 PM to 11:30 PM.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)