Washington [US], October 22: World gold prices on October 21 suddenly fell more than 6%, the deepest one-day drop since 2013, as investors took profits after the recent price increase.
After peaking at $4,381 an ounce on October 20, the world gold price fell 6.3% on October 21 to $4,082 an ounce, Reuters reported. According to the Financial Times , this is the deepest one-day drop in gold prices since April 2013. Silver and platinum prices also fell sharply on October 21, down 7.4% and 5%, respectively.
Many analysts believe this is a correction that has been long overdue. Analyst Nicky Shiels at Swiss precious metals services provider MKS Pamp said the main catalyst for the recent rise in gold prices has been extreme overbought conditions and commented that the rally is now saturated.
Gold prices have been rising sharply since the beginning of this year and have increased rapidly by 25% in the past two months.
Gold prices rose, fueled by investor concerns about rising government debt, the health of the US dollar and safe-haven demand amid US President Donald Trump's trade war .
Analysts said the US-China agreement to de-escalate, the recent recovery of the USD and the lack of important data on investors' positions in the futures market - due to the US government shutdown - were the catalysts for the sharp drop in world gold prices on October 21.
Besides, the gold buying season on the occasion of Diwali in India, the world's second largest gold consumer, is also gradually coming to an end.
The main driver of gold's rise this year is believed to be demand from central banks, as they increase their gold reserves to diversify away from the US dollar. In recent months, institutional investors have also increased interest in gold exchange-traded funds (ETFs). Gold buying by Asian consumers has also contributed to the price increase in recent weeks.
Will gold prices continue to rise?
Standard Chartered Bank analyst Suki Cooper said the gold market is currently undergoing a technical correction as prices temporarily ease after a period of rapid growth. However, she still believes that the long-term outlook for gold is still tilted to the upside.
Wall Street remains bullish on gold prices next year, according to Yahoo Finance . Analysts from Bank of America recently highlighted their long-term gold buying recommendation, predicting the precious metal will peak at $6,000 an ounce by mid-2026. Wall Street now expects gold prices to reach $4,900 an ounce by the end of 2026, up from their previous forecast of $4,300 an ounce.
JPMorgan analysts estimate that gold prices could reach $6,000 an ounce by 2029.
"This is just a bump in the road. Inflation is still high, real interest rates are still low, geopolitical concerns are still there, the US government is still shut down. That's the catalyst mix for gold prices to rise," said Tom Essaye, founder of research firm Seven Report.
Similarly, Michele Schneider, chief strategist at consultancy Marketgauge, said that the gold price rally would only be interrupted if the US government suddenly and sharply reduced its public debt - which has not happened yet - and peace was established in the world.
Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, said that in the short term, gold and silver "may need a break" after their recent surge, according to CNBC. However, he remains positive in the medium to long term, still holding a lot of gold and advising investors to be prepared to buy more if prices fall.
Ross Mayfield, investment strategist at financial services firm Baird, compared gold to artificial intelligence (AI) stocks and said that AI has greater growth potential. According to him, the AI sector has many new growth drivers such as technology stories, potential profits, wide applications and rapid development speed. Meanwhile, gold is a familiar asset, "already has an old story", meaning it is difficult to have new factors to promote stronger growth.
Louis Navellier, founder and chief investment officer of Navellier & Associates, is bullish on gold, saying that the lack of confidence in central banks and governments around the world, such as in France, is causing investors to seek gold as a safe haven.
He predicts a "global collapse of interest rates," in which the opportunity cost of holding gold will fall, so gold tends to increase in price. He likens "America as an oasis in the midst of global chaos" and "gold as the best oasis in that chaos," and expects gold to continue to increase in price.
Source: Thanh Nien Newspaper
