Is gold losing its shine? What bullion’s plunge could signal, according to analysts

[SINGAPORE] Questions on whether gold’s bull run is gone for good surfaced after its overnight plunge, wich saw steep sell-offs hitting markets and halting the rally that spurred the yellow metal’s meteoric rise this year.

On the Singapore Exchange (SGX), bullion-related securities mirrored the losses with declines on Wednesday (Oct 22).

Catalist-listed gold mining group CNMC Goldmine , which had soared 400 per cent as at mid-October this year, fell 5 per cent. Gold exchange-traded fund (ETF) SPDR Gold Shares lost 4.4 per cent or 17.49 points and was the top ETF decliner on the SGX.

Pawnbrokers ValueMax and MoneyMax Financial Services , which are both proxies for the gold trade, declined by 2.5 per cent and 1.1 per cent, respectively.

The rout follows a record week, in which spot gold prices reached the US$4,300 mark on Oct 16, and HSBC analysts on Oct 17 forecast gold prices hitting US$5,000 per ounce in 2026.

It also comes amid a bull run for gold this year. The yellow metal had soared around 60 per cent in the year to date as at Monday, outstripping Bitcoin and the Magnificent Seven stocks that fuelled the S&P 500’s 15 per cent rally.

But the recent pullback, in which spot gold prices tumbled as much as 6.3 per cent on Tuesday – their steepest fall in more than a decade – has raised questions about whether gold’s rally is finally over. 

Favourable fundamentals, continued upsides

City Index and Forex.com analyst Fawad Razaqzada thinks that it is too early to say if gold’s bull trend has ended, even as next week’s upcoming meeting between US President Donald Trump and Chinese President Xi Jinping has cooled safe-haven demand. 

“While corrections are natural, it is worth pointing out that many investors missed out on the big rally. Soon, they may step in to buy the dip, which should keep the sell-off contained,” he said. 

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Charu Chanana, chief investment strategist at Saxo Bank, observed that the precious metal is undergoing a “normal reset” after a strong run, with gold miners set to be harder hit by the rout.

This correction comes amid overbought conditions, softer demand from India after Deepavali and a stronger greenback, she noted.

“None of this means the precious metals story is over. In fact, these are healthy developments, helping to cool what had become an overheated trade and preventing the rallies from turning into a bubble,” said Chanana.

Carsten Menke, head of next generation research at Julius Baer, noted: “Even though such a steep sell-off is rather unusual… we are still of the opinion that a short-term consolidation is much more likely than a longer-term correction. A consolidation would in fact not be unusual after such a sharp and steep rally and should be considered healthy.”

He added that the fundamental backdrop for gold remains “favourable”, as it benefits from safe-haven demand and central-bank buying, as well as the outlook for lower US interest rates and a weaker US dollar.

“Against the backdrop of a slowing US economy, we see safe-haven demand as a cyclical factor which could become structural should the current concerns about the status of the US dollar and the independence of the US Federal Reserve be confirmed,” he said.

“Considering our long-term constructive views on both gold and silver, the sell-off should open up another buying opportunity… there is no particular reason to pinpoint for the sell-off, apart from continued profit-taking against the backdrop of a somewhat stronger US dollar.”

Swiss private bank Lombard Odier’s global foreign-exchange (FX) strategist Kiran Kowshik and head of investment strategy Luca Bindelli said that macroeconomic and geopolitical uncertainties are likely to “remain conducive to further gold demand”. 

They maintained a positive outlook on the yellow metal and raised their 12-month price target to US$4,600 per ounce. 

“The gold market is technically overbought, but constrained supplies and strong demand support prices. Lombard Odier remains overweight gold, and has taken partial profits following the recent rally,” they noted.

Falling US real interest rates, heightened geopolitical risks and sustained central bank and ETF buying should support a continued upside for gold, they added. 

Potential further downside, but hedge argument intact

OCBC FX and rates strategists Frances Cheung and Christopher Wong cautioned that gold faces potential further downside, should daily closing prices fall beneath key support levels. 

“The surge in gold prices to (a) record high (at) record pace, may have stretched short-term valuations and risk-reward. Sentiment and speculative positioning are starting to look elevated, and there is a risk that gold may potentially be vulnerable to consolidation,” they said.

Similarly, Saxo Bank’s Chanana believes that the near-term outlook for gold miners hinges on whether prices hold above key support levels.

“If that support holds and macro conditions stabilise, this could prove a classic buy-the-dip moment for patient investors. However, if sentiment weakens further or earnings guidance disappoints, (gold) miners may see another leg lower before finding a base,” she said.

OCBC’s Cheung and Wong noted that positive developments regarding US-China tensions, an end to the US government shutdown or progress on the Russia-Ukraine war could lead to some moderation in gold prices. 

“That said, we remain constructive on gold outlook. Nominal rates are likely to trend lower as the Fed eases, while central-bank and institutional demand remain solid,” they said. 

“The diversification or hedge argument for gold – against geopolitical, fiscal and currency risks – also stays intact,” they added.