Gold and silver plunge in a rare crash over the years! During trading, gold fell more than 6%, silver nearly 9%, as Wall Street sounds the correction alarm.

Gold and silver plunge in a rare crash over the years! During trading, gold fell more than 6%, silver nearly 9%, as Wall Street sounds the correction alarm.

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After hitting record highs for several consecutive days last week, the precious metals market suddenly turned. On Tuesday, October 21, gold and silver experienced a rare and dramatic plunge not seen in many years.

As of Monday, gold had hit an intraday historical high for six consecutive trading days but then suffered its largest drop in twelve years. During early U.S. trading, spot gold approached $4,082, down about 6.3% on the day, marking the biggest intraday loss since April 2013. NY gold futures fell to $4,093, down 6.1% on the day.

Silver also hit new intraday lows during early U.S. trading. Spot silver fell below $47.90, down nearly 8.7% on the day, posting its largest intraday drop since February 2021. NY silver futures dropped to $47.12, down about 8.3% on the day.

Multiple factors jointly pressured precious metal prices. Investors are watching talks reportedly set for next week, expecting trade tensions to ease, which has reduced the demand for precious metals as safe havens. Additionally, a stronger dollar, overbought technical levels, and opaque investor positions have all combined to end the previous rally in precious metals.

This sell-off coincides with missing key position data due to the U.S. government shutdown. Ole Hansen, commodity strategist at Saxo Bank, warned that speculative long positions may have accumulated greatly, making gold and silver more vulnerable to a pullback. The seasonal buying spree in India coming to an end has also intensified market pressure.

Despite the steep decline, some analysts believe that the fundamentals supporting the rise in precious metals have not changed, and potential buying may limit the extent of the pullback.

Technical Overbought Triggers Profit-Taking, Lack of Position Data Intensifies Uncertainty

The Relative Strength Index for gold indicates that prices have entered deeply overbought territory. Hansen said that in recent sessions, traders have become increasingly concerned about the risks of a pullback and consolidation. "It's during pullbacks that the true strength of the market emerges. This time should be no exception, and potential buying may limit any correction."

Precious metals volatility surged recently, with traders seeking to hedge against possible price declines in other portfolios or profit from the drop. Last Thursday and Friday, option contract trading volume linked to the world’s largest gold ETF both exceeded 2 million, breaking previous records.

Due to the ongoing U.S. government shutdown, commodity traders cannot obtain the weekly position reports released by the U.S. Commodity Futures Trading Commission, which typically show positions of hedge funds and other money managers in U.S. gold and silver futures. Without this data, speculators might find it easier to amass unusually large one-way positions.

Hansen pointed out that the timing of the missing position data is very delicate, and speculative long exposure in both metals may have accumulated significantly, making them more vulnerable to a pullback.

Maximilian Layton, head of commodities research at Citi, predicted in a report that the end of the U.S. government shutdown and the announcement of trade agreements will prompt gold prices to consolidate over the next two to three weeks. Citi maintains its target price of around $4,000 per ounce for gold, noting that this price was previously seen as an ideal level, but now appears to be a "bearish" expectation.

Analyst Opinions Diverge

Kathleen Brooks, research director at XTB, commented on Tuesday that the sudden drop in gold and silver prices lacked a clear trigger, and may have been caused by overvaluation and signals that U.S. CPI data may come in below expectations. She believes the price drop isn't necessarily a bad thing, showing that investors aren't getting ahead of themselves and that there is a ceiling to the gold rally. Although the decline exceeded expectations, the fundamental drivers behind gold and silver's rise remain in place.

Soojin Kim, commodity analyst at Mitsubishi UFJ Financial Group, noted that even though there are signs the rally could be overdone, investors continue to buy gold. On Monday, easing trade tensions brought optimism, and spot gold at one point rallied nearly 3.1%. Since 2025, gold has risen more than 65% in total; despite overbought technical indicators, demand remains strong.

Bloomberg strategist Tatiana Darie said that current absolute levels of ETF gold holdings have not yet reached previous peaks, and rallies tend to last longer. However, history shows that momentum ultimately fades, and in most cases, buying turns into selling. If delayed data eventually shows the U.S. economy is stronger than expected, gold could see an even bigger correction.

Silver Market Faces Supply Adjustment

After surging nearly 80% this year, silver also plummeted sharply, with its rally supported by the same macro factors as gold and historic short squeezes in the London market. Benchmark prices higher than NY futures prompted traders to ship metal to the UK to ease tightness.

This Tuesday, the amount of silver withdrawn from vaults associated with the Shanghai Futures Exchange had the largest single-day outflow since February, with NY inventories also declining.

Risk Disclosure and DisclaimerThe market has risks; invest with caution. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investment is at your own risk. ```