After showing consistent growth, gold prices experienced their steepest single-day drop in over a decade, tumbling 5.7% to $4,109 per ounce.
The market reversal seen on Tuesday, October 21, erased around $1.75 trillion from the metal’s market capitalization and marked a start contrast to the continued ascent of Bitcoin, which rallied to a fresh high of $114,000.
The plunge, the biggest since April 2013, came after the precious metal had recorded an all-time high and reached above $4,380 only a day before.
The abrupt correction was explained by analysts by a combination of profit-taking and a shift in investor sentiment.
One of the market experts said, “Gold made an incredible run where its prices increased over 60 percent in the present year, and it was time to take a breath. We are in an archetypal instance of short-term profit-taking following a parabolic move.”
There were several factors that came together to spur the sell-off.
The upward rising U.S dollar, the lowering of the U.S-China trade war and the healthy third-quarter earnings by U.S based companies all minimized the short term value of non-yielding, safe haven investments such as gold.
Moreover, the end of the Diwali festival in India, the season of the maximum physical gold demand, removed a key pillar of support.
The rout extended across the precious metals complex, as silver dropped 8.7% to around $49.70, its worst day since 2021.
Large gold mining stocks also tumbled significantly.
The scenes in the cryptocurrency market were diametrically different.
With the fall of gold, the Bitcoin went up 2 percent to hit a new high of $114,000.
This action sparked more than 150 million short liquidations, which reinforces the underlying long-term bullish trend in the digital asset and reflects an increase in divergence in preference.
Although the short-term correction is harsh, the long term future of gold as many experts indicate is still intact.
Such underlying reasons like unpredictability in geopolitics and financial risks in the future are still seen as supportive.