Gold prices extended their sharp losses on Wednesday, retreating further after suffering the steepest single-day decline in more than a decade. The move came as traders locked in profits following a remarkable rally, with markets turning cautious ahead of key US inflation data expected later this week.
Spot gold slipped another 2% to around US$4,039.50 per ounce by midday, following Tuesday’s dramatic 6% plunge. US gold futures mirrored the weakness, down about 1.5% to US$4,050 in New York.
Despite the heavy sell-off, bullion remains comfortably above the crucial US$4,000-an-ounce level — a benchmark it last traded near two weeks ago before surging to fresh record highs. On Monday, gold reached an all-time peak of US$4,380.89 per ounce, marking an extraordinary run since mid-August.
Technical Selling and Profit Taking
According to Suki Cooper, head of commodities research at Standard Chartered, the decline was primarily driven by technical selling after the metal entered overbought territory. Cooper noted that while short-term corrections were expected, the bank continues to see upside for gold into next year.
“Given the aggressive move to the upside over the past several weeks, it’s not completely surprising to see a bit of profit taking ahead of the CPI report on Friday,” said David Meger, director of metals trading at High Ridge Futures, in comments to Reuters.
This correction effectively halts the momentum of the so-called debasement trade — a move by investors seeking protection from fiscal imbalances and weakening currencies. Retail participation in the gold market has also grown sharply, with trading volumes in gold-backed ETFs and options surging as smaller investors joined the rally.
Fed Policy and Geopolitical Factors
Much of gold’s record-breaking performance has been underpinned by expectations that the US Federal Reserve will begin cutting interest rates before year-end. Market pricing currently suggests a 25-basis-point cut at next week’s policy meeting.
Investors are also closely watching for developments surrounding a potential meeting between US President Donald Trump and China’s President Xi Jinping, as well as a proposed summit with Russian President Vladimir Putin, both of which could shape the geopolitical risk landscape heading into 2026.
Long-Term Bullish Outlook
Even after two days of sharp declines, gold remains up more than 55% year-to-date, buoyed by persistent geopolitical tensions, softening economic data, and robust inflows into exchange-traded funds.
“We maintain a bullish outlook for gold and silver into 2026,” said Ole Hansen, head of commodity strategy at Saxo Bank. “After a well-deserved correction, traders will likely reassess before realising the same forces that drove this year’s historic rally — from central bank demand to fiscal imbalances — are still very much in play.”
However, Citigroup has taken a more cautious stance following the recent slump, trimming its overweight gold recommendation and signalling the potential for near-term consolidation around US$4,000 per ounce.
“Gold prices have likely run ahead of the ‘debasement’ story,” wrote Citigroup strategists, adding that while long-term central bank demand remains a core driver, “there’s no immediate rush to re-enter the trade at current levels.”
For now, gold appears to be stabilising around the US$4,000 mark — a level that may serve as both a technical and psychological battleground before the next major move.
Disclaimer: The information provided by FirstGold News is for general informational purposes only and should not be considered financial or investment advice. Market prices, data, and projections mentioned in this article are based on publicly available information and may change without notice. Readers are encouraged to conduct their own research or consult a licensed financial advisor before making any investment decisions related to precious metals or other financial instruments. FirstGold News assumes no responsibility for any loss or damage arising from reliance on the information contained herein.
