Cracked Gold Price, Falls 6% in a Day … "Rally Over" vs "Breather"

Gold spot price, intraday 6.3% drop … Largest decline in 12 years; U.S. corporate strong earnings and hopes for a U.S.-China thaw

'Safe-haven asset' preference cools

International silver spot price also plunges 7.6%

Platinum price falls 5% in a day

Diverging forecasts on 'gold price trajectory'

Some warn "if speculation cools, a sharp drop"

BoA and Goldman predict price increases

Gold, which had been rising while setting record highs, plunged more than 6% in a single day. It is the largest one-day drop in 12 years. Among market experts, views are sharply divided between "the rally is over" and "a healthy correction."

◇Gold's upswing loses momentum

On the 21st (local time) at the New York Mercantile Exchange, the gold spot price at one point fell 6.3% from the previous day to $4,082.03 per troy ounce. The Financial Times (FT) reported that this was the largest one-day decline since 2013. The gold spot price trimmed its loss somewhat before the close and finished at $4,093.18. Gold futures also plunged: the December delivery gold futures settled at $4,109.1 per troy ounce, down 5.7% from the previous session.

The flagship gold exchange-traded fund (ETF) 'SPDR Gold Shares' (GLD) also fell more than 6% that day. Gold mining company ETFs such as 'VanEck Gold Miners' (GDX) showed sharp declines around 10%. Gold mining companies were hit as well. Shares of Agnico Eagle Mines, AngloGold Ashanti, Newmont, and Ollama Mining also posted double-digit declines.

Gold has risen sharply this year. After surpassing $3,000 per troy ounce in March, it exceeded $4,000 earlier this month, gaining more than 25% in just two months. The previous day the spot price reached around $4,381 per ounce, setting an all-time high. It has risen nearly 60% so far this year.

Concerns about the prior rapid ascent, combined with hopes for easing U.S.-China trade tensions, contributed to the day's sharp fall in gold. Continued strong third-quarter earnings by U.S. companies also helped restore risk appetite for equities and other risk assets. Bloomberg analyzed that reduced liquidity due to the Indian stock market being closed for the major Hindu festival Diwali — India being one of the main gold-buying parties — was another factor in the day's decline.

◇Focus on U.S. CPI

Jim Wyckoff, a senior analyst at metals information firm Kitco Metals, said, "Improved market risk appetite this week is acting as a bearish factor for precious metals." International silver spot also plunged more, trading at $48.49 per troy ounce, down 7.6% from the previous session at the same time. Platinum prices also fell 5%.

Investors trying to gauge the short-term direction of gold are focusing on the U.S. September Consumer Price Index (CPI) scheduled for release on the 24th. Major economic data releases were suspended due to a U.S. federal government shutdown. However, the U.S. Bureau of Labor Statistics announced it will release the CPI on the 24th, nine days later than the originally scheduled October 15 date.

With the U.S. Federal Reserve (Fed) set to decide its policy rate at the Federal Open Market Committee (FOMC) meeting on the 28th–29th, the CPI is expected to be an important variable for the future direction of monetary policy. Because gold does not pay interest or dividends, a decline in interest rates can give upward momentum to gold prices.

◇Long-term outlooks vary by expert

Predictions for the mid- to long-term gold price vary among experts. Bill Gross, known as the "Bond King," warned on social media on the 17th that "gold has become a meme asset" and that if speculative fervor cools, gold prices could plunge. According to the U.S. Commodity Futures Trading Commission (CFTC), as of the 11th the volume of speculative investors' gold futures contracts stood at 266,700 contracts (100 troy ounces per contract), remaining at a high level. Analysts point out that if gold prices falter, sell orders aimed at realizing profits could flood the market at once, risking a sharp price drop.

There is also analysis that this adjustment is a temporary price decline. Suki Cooper, an analyst at Standard Chartered, said, "This decline is merely a technical correction, and there remains upside over the long term." She analyzed, "Although the number of gold investors has exploded in recent months, this correction is testing the market's resilience."

Forecasts from major global investment banks released before this gold price plunge also diverged. Bank of America set a next-year gold target of $5,000 per troy ounce. Goldman Sachs also set a next-year target of $4,900 based on central bank demand and potential future Fed easing. By contrast, HSBC and UBS forecast next-year targets of $3,950 and $3,900, respectively.

Reporter Joo-wan Kim/ New York = Correspondent Shin-young Park kjwan@hankyung.com