New York, Oct. 22 (Reuters) — Gold prices edged slightly higher on Wednesday after a sharp one-day decline that marked the steepest drop in over a decade, reflecting a pause in the precious metal’s recent record-breaking rally.
Spot gold was trading at $4,141.48 per troy ounce at 1:46 a.m. ET, up about 0.4% after tumbling more than 5% on Tuesday. On Monday, gold had reached an all-time high of $4,381.21 per ounce, fueled by a surge in safe-haven buying amid global economic uncertainties.
U.S. gold futures fell 5.7% on Tuesday to $4,087.70, marking the largest single-day percentage drop since April 2013. Other precious metals also suffered: silver declined 7% while platinum dropped 5% during the same period. Analysts said the sharp sell-off followed weeks of heavy buying that pushed gold to overheated levels.
Gold has been on a historic rally in 2025, surging over 50% so far this year, surpassing previous spikes seen after events like the 9/11 attacks, the 2008 financial crisis, and the COVID-19 pandemic. In just the last two months, the metal rallied around 25%, driven by concerns over rising U.S. government debt, political uncertainty, and expectations that the Federal Reserve may cut interest rates further.
However, Tuesday’s pullback showed that investors were eager to lock in profits. Renewed optimism over U.S.-China trade talks and a rebound in the U.S. dollar contributed to the decline. Officials from both countries are expected to meet later this week, ahead of a potential meeting between President Joe Biden and Chinese President Xi Jinping.
“I expect we’ll probably work out a very fair deal with President Xi of China,” President Biden said Monday, signaling cautious optimism about trade negotiations. Analysts say that progress on the trade front could provide further support to riskier assets, potentially easing the immediate demand for gold as a safe haven.
Market watchers also highlighted a seasonal factor affecting demand. The Diwali festival in India, the world’s second-largest consumer of gold, has concluded, reducing physical buying in one of the key global markets.
Despite the recent correction, long-term sentiment for gold remains bullish. “Corrections like this are natural after such a sharp rally,” said Caroline Brooks, senior metals strategist at Horizon Capital in New York. “Gold had become overheated, and profit-taking was inevitable. But the underlying fundamentals — economic uncertainty, geopolitical risks, and potential Fed rate cuts — continue to favor the metal.”
In addition to trade talks, analysts are watching U.S. economic indicators and Federal Reserve signals closely. Any signs of slower growth or easing monetary policy could reignite buying, while stronger-than-expected data may pressure gold prices further.
Investors are also eyeing broader market trends. Rising inflation, volatile equity markets, and global geopolitical tensions continue to support demand for gold as a safe-haven asset. While short-term volatility is likely, many strategists see gold maintaining its appeal as a hedge against uncertainty in the coming months.
In summary, gold’s dramatic rally may have paused, but the metal’s long-term outlook remains intact. Wednesday’s modest gains indicate that while profit-taking and easing trade tensions can temporarily weigh on prices, gold is still benefiting from underlying economic and geopolitical factors.