Gold falls more than 4% as investors take profits after record highs
Gold plunged over 4% and silver slid sharply after recent record highs, but both metals remain on track for strong monthly gains amid widening demand and geopolitical uncertainty.
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By Torontoer Staff
Gold dropped more than 4% on Wednesday as investors took profits following recent record highs, while silver fell sharply. Despite the sell-off, both metals remain on track for substantial monthly gains driven by broadening demand and geopolitical uncertainty.
Spot gold was down 4.6% at $5,149.99 an ounce by 10:48 a.m. ET (1548 GMT), after earlier touching $5,594.82. U.S. gold futures for February delivery declined 2.8% to $5,156.20.
Market moves and immediate reactions
Traders described a rapid profit-taking episode after precious metals hit fresh highs. David Meger, director of metals trading at High Ridge Futures, called it a "dramatic sell-off after precious metals made new recent all-time highs." Even so, spot gold is still up about 19% for the month and has gained 3.6% so far this week.
Why demand widened
Interest in gold has widened beyond traditional buyers. Institutional flows, crypto-linked allocations and central bank activity have all contributed to stronger demand. Brian Lan, managing director at GoldSilver Central, said that demand is broadening from crypto money to central banks, noting that "precious metals are well in the limelight and investors always like to go where they can get high returns."
- Crypto exposure: The CEO of Tether said the company plans to allocate 10 to 15 percent of its investment portfolio to physical gold.
- ETF inflows: Holdings in the SPDR Gold Trust reached a near four-year high, signalling strong institutional appetite.
- Central bank activity: Ongoing purchases by some central banks and policy uncertainty have supported safe-haven demand.
Geopolitical and policy context
Geopolitical tensions added to market caution. U.S. President Donald Trump pressed Iran to negotiate a nuclear deal while Tehran threatened retaliation against the U.S., Israel and allies. At the same time, the U.S. Federal Reserve left interest rates unchanged on Wednesday. Markets are awaiting the president's announcement on a replacement for Fed chair Jerome Powell, whose term ends in May, and expect the central bank to trim rates in June.
Silver, platinum and palladium moves
Silver fell sharply, losing 6.6% to $108.84 an ounce after earlier reaching $121.64. Silver has surged more than 50 percent so far this year, driven by supply deficits and momentum buying. Smaller market size makes silver, platinum and palladium more vulnerable to speculative inflows that can push prices well beyond levels justified by physical demand.
The silver, platinum and palladium markets are small relative to gold or the S&P 500, making them vulnerable to speculative inflows that have left prices totally detached from where physical demand is robust.
Guy Wolf, global head of market analytics at Marex
Spot platinum slipped 1.7% to $2,650.15 an ounce, after hitting a record high of $2,918.80 earlier in the week. Palladium fell 6.7% to $1,935.
What investors should watch next
After the correction, several factors will determine whether metals resume their rally or continue to pull back. Key items to monitor include central bank policy and communications, developments in geopolitical hotspots, ETF and institutional flows, and ongoing reports on supply and industrial demand for silver and platinum group metals.
- Federal Reserve guidance and any shifts in rate expectations.
- Geopolitical developments involving Iran, the Middle East and broader diplomatic tensions.
- ETF holdings and large allocations from non-traditional investors such as crypto firms.
- Physical supply indicators, especially for silver and platinum.
The recent pullback reflects profit-taking after a rapid run-up. But widening sources of demand and lingering economic and geopolitical uncertainty mean precious metals could remain volatile and attract renewed buying if risk or rate expectations shift.
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