Sharp Decline

Gold prices dropped below $4,000 per troy ounce on Monday amid growing optimism about progress in US-China trade negotiations.

Context

Gold surged to a record high of $4,381 per troy ounce on October 20, capping a rally that saw the precious metal climb more than 50% in 2025. 

The unprecedented rise was driven by investors seeking protection against geopolitical uncertainty, concerns about government debt levels, and expectations of Federal Reserve interest rate cuts. Central banks around the world also contributed to the rally by purchasing gold as they diversified away from the US dollar, though these purchases had begun to slow in recent months.

Sharp Decline

Gold futures fell 3.39% on Monday to a low of $3,990 before eventually settling at $3,997.40 per troy ounce, extending losses from last week when gold experienced its steepest daily decline in over a decade.

The precious metal has now fallen more than 5.1% from its recent peak, with silver prices also tumbling over 3.5% to $46.83 per troy ounce. The sell-off came as US and Chinese negotiators outlined a framework for a trade deal that could pause tariffs and ease tensions between the world's two largest economies, thereby reducing some economic uncertainty and gold demand.

Industry Reaction

Gold traders and analysts gathering at an annual conference in Japan this week described the decline as a healthy correction to an unsustainable rally. Industry executives blamed recent price gains on investors buying gold simply to bet on further price increases rather than as a long-term investment, with one senior executive at a major bullion trading bank telling outlets that "only the lunatics ever thought gold would get this high." 

Analysts have suggested that prices may fall further to as low as $3,500 to $3,700 per ounce before the market stabilizes.

Gold’s Future

The Federal Reserve is expected to announce a quarter-percentage-point interest rate cut on Wednesday, which could provide renewed support for gold since the precious metal typically performs well in low-interest-rate environments. However, the improving outlook for US-China trade relations has reduced demand for safe-haven assets in the near term.

Despite the recent pullback, several major banks have maintained price targets of $5,000 per ounce for 2026, suggesting confidence in gold's longer-term trajectory remains intact.