Gold and silver continued to slide in early trading Wednesday, compounding losses from Tuesday’s dramatic selloff, as investors moved to lock in gains following an extended rally that many now fear had pushed prices into overbought territory.
Spot gold declined as much as 3%, briefly sliding near $4,000 an ounce before trimming losses. This follows Tuesday’s plunge of up to 6.3%—the metal’s most significant intraday drop in over a dozen years. Spot silver, meanwhile, continued its descent after an 8.7% tumble in the previous session. Market watchers noted that technical signals had been pointing to increasingly stretched positions after months of rapid advances in both metals.
The downturn ends a months-long surge in precious metals that recently saw both gold and silver notch all-time highs. Gold, in particular, had climbed for nine consecutive weeks and remained up roughly 55% for the year, buoyed by sustained central-bank buying, strong inflows into exchange-traded funds, and demand for safe havens amid persistent geopolitical and trade frictions.
Gold’s ascent had been driven in large part by speculation over potential Federal Reserve rate cuts later this year, as well as investor moves away from sovereign debt and currencies in response to escalating fears over ballooning US budget deficits.
Following the sharp pullback, Citigroup Inc. downgraded its overweight call on gold, citing concerns over overstretched positions. In a note, the bank’s Commodities Research team predicted a period of consolidation around the $4,000 level in the weeks ahead.
In the long run, factors such as ongoing central bank diversification away from the US dollar could reassert themselves, but at present, there’s little urgency to bet on further gains, the bank wrote, highlighting that prices had surged ahead of the so-called ‘debasement’ trade narrative.
Technically, the recent move in bullion is being classified as a correction—albeit a substantial one—according to Nick Twidale, chief market analyst at AT Global Markets in Sydney. That massive reallocations helped drive prices higher, and sizable profit-taking has now triggered successive stop-losses on the way down, Twidale said. A decisive breach below $4,000 could lead to deeper capitulation.
The declines coincided with optimism over potential advances in the U.S.-China trade negotiations. On Tuesday, President Donald Trump told reporters he anticipated a “good deal” from upcoming talks with China’s Xi Jinping, though he acknowledged the high-stakes meeting may yet be delayed.
For silver, last week’s historic squeeze in the London market drove prices above the 1980 record set during the Hunt brothers’ infamous play for market control. The resulting tightness elevated benchmark prices above those in New York, spurring shipments to London to address shortages. On Tuesday, available supplies in Shanghai-linked vaults experienced the largest one-day drop since February, a pattern mirrored by New York stockpiles.
