Gold prices tumble 6% in biggest drop since 2013 as investors rush to buy

As pictures of queues outside gold stores flooded social media over the past month, professional precious metals traders were getting nervous. 

Gold is “an overcrowded trade that’s overextended by every technical metric,” Nicky Shiels, head of research at precious metals refiner MKS Pamp SA, wrote to clients on October 6. On Monday, as prices soared to new record highs near $4,400 an ounce, Marc Loeffert, a trader at Heraeus Precious Metals, warned that the metal was “getting even more overbought.” 

The reckoning came this week. Gold prices plunged by as much as 6.3 per cent on Tuesday, the biggest drop since 2013, and held losses through Friday to close at $4,113.05 an ounce. In dollar terms, its $138.77 weekly decline ranked among the largest ever. 

Was it a turning point in gold’s multiyear bull market, or just a dip? In Bangkok’s Chinatown, the nation’s gold trading hub, Sunisa Kodkasorn, a 57-year-old textile factory worker, had no doubt. “Gold is the best investment,” she said. “We decided to gather all our money and come today because we knew prices had dropped.” 

She wasn’t alone. From Singapore to the US, dealers reported a rush of retail buyers snapping up gold as prices fell.  Kodkasorn’s attempt to buy the dip was stymied because the size of gold bar she could afford was sold out. Meanwhile, in Kyoto, nearly a thousand professional traders, brokers, and refiners descended for Japan’s largest annual precious metal conference, which opens Sunday, signaling strong enthusiasm among market insiders. “Bull markets always need a healthy correction to weed out froth and ensure the cycle has duration,” Shiels said this week.  

The gold price peaked just above $4,381 on Monday. What was unusual was that the plunge was largely confined to precious metals; other major markets, from equities to Treasuries to oil, barely moved. Analysts debated the cause: some cited profit-taking by hedge funds, others pointed to selling by Chinese banks. The decline, however, had been widely anticipated after gold soared 30 per cent in just two months. 

On New York’s Comex futures market, bearish put options spiked relative to bullish call options, some of the highest levels since the 2008 global financial crisis. A commodities-focused hedge fund manager admitted frustration that, despite being a long-term gold bull, he had missed opportunities because he began betting on a correction too early. 

Still, finding a true gold bear remains difficult. Most precious metals analysts have remained bullish over the past two years, albeit underestimating the speed of the rally. A London Bullion Market Association survey at the start of the year found almost all analysts expected prices to rise, yet few foresaw gold trading above $3,300 in 2025. 

Gregory Shearer of JPMorgan Chase & Co noted that dip-buying by central banks and physical buyers would likely prevent reversals from being too severe.   

History, however, offers caution: when gold hit $1,921 in September 2011, most analysts at that year’s LBMA conference were bullish, but it took nearly a decade to reclaim that peak. 

The current surge has been driven by a wave of central bank purchases following sanctions on the Russian central bank in 2022, fears over unsustainable government debt, and, more recently, a surge in retail demand. 

In Singapore, Pete Walden of BullionStar reported the busiest day ever on Tuesday, with queues forming before opening. In the US, Stefan Gleason of Money Metals Exchange said demand from bargain hunters exceeded supply. In Tokyo, Vietnamese student Hang Viet queued in Ginza, seeing the dip as an opportunity to invest. “I believe gold prices will keep rising in the long run,” he said. 

Even after the recent correction, the message is clear: gold remains a sought-after hedge, attracting both institutional and retail investors ready to buy the dip, keeping the bull market alive for now.