TLDR:
- Gold briefly crossed $3,500 before falling to around $3,300, experiencing its biggest one-day drop since November
- Gold is still up nearly 30% year-to-date, significantly outperforming the S&P 500
- Market volatility driven by Trump’s threats of 145% tariffs on China and criticism of Federal Reserve Chair Jerome Powell
- Traders are responding to mixed signals from the US administration on China trade policies
- Analysts suggest gold may be reaching “extremes” and could be heading for a period of price consolidation
Gold has experienced dramatic price swings this week, initially surging to record heights before pulling back sharply. The precious metal briefly crossed the $3,500 mark on Tuesday before sliding to around $3,300 on Wednesday, marking its steepest one-day loss this year.
Despite the recent pullback, gold remains up nearly 30% since the start of 2025. This performance far outpaces the S&P 500, which has fallen more than 8% during the same period.
The price volatility comes amid heightened market uncertainty. President Donald Trump’s threats of imposing 145% tariffs on Chinese goods created initial panic. His public criticism of Federal Reserve Chair Jerome Powell for not lowering interest rates further added to market jitters.
Market Reactions to Political Signals
Gold’s wild price swings mirror the mixed signals coming from Washington. After initially taking a harsh stance, Trump hinted at softening tariffs on China on Tuesday and walked back suggestions about replacing Powell.
Treasury Secretary Scott Bessent has since cast doubt on a timely resolution to the US-China trade war. These conflicting messages have contributed to gold’s volatile trading pattern this week.
“The temporary reprieve from Trump has fizzled out,” according to Priyanka Sachdeva, a Singapore-based analyst at Philip Nova Pte. She noted that investors who missed earlier buying opportunities drove today’s price increase.
The precious metal rebounded Thursday, rising above $3,330 an ounce. This recovery comes after Wednesday’s sharp decline, which was the biggest single-day drop since November.
Global Market Impact
The market turmoil has extended beyond US borders. Futures for the precious metal in Shanghai posted their largest intraday drop since 2013 on Wednesday, with trading volumes surging to record levels.
Joe Cavatoni, senior market strategist at the World Gold Council, believes investors will continue turning to gold as long as market volatility persists. “As monetary policy becomes more complex in the U.S., the market is continuing to try to keep up,” he wrote.
The dollar’s recent plunge and fluctuating bond yields have made gold more attractive as a safe-haven asset. Daniela Sabin Hathorn, senior market analyst for Capital.com, observed that “Gold continues its impressive rally as market confidence in the soundness of the US administration wavers.”
Technical Analysis Perspectives
Some analysts suggest gold prices may have reached unsustainable levels. Jeffrey deGraaf, chairman and CEO of Renaissance Macro Research, writes that the price run-up has pushed gold to “extremes.”
DeGraaf believes gold is “vulnerable to an extended consolidation” – a period when the price levels out after a major move. This assessment suggests investors might find better entry points in the future.
Andrew Addison, editor of The Institutional View, notes that gold’s quick pullback from $3,500 creates a short-term sell signal. The momentum simply wasn’t there to sustain prices at that level.
However, many factors supporting gold’s rise remain in place. Geopolitical uncertainty, stock market volatility, and recession concerns continue to make gold attractive as a hedge against instability.
For investors seeking safety in uncertain times, gold maintains its appeal despite recent price fluctuations. As of Thursday morning in London, gold traded 1.2% higher at $3,328.02 an ounce, with the Bloomberg Dollar Spot Index falling 0.3%.
Other precious metals showed mixed performance, with silver and platinum slipping while palladium edged higher.
