Gold‘s stellar run in 2025 has hit a speed bump, with spot prices plunging more than 5% in a single day. It was the largest daily drop since 2013. At these prices, $230 was the biggest one-day drop in dollar terms.

This sudden collapse, however, follows an extraordinary year. Even after the selloff, gold remains up more than 50% year to date — easily outpacing equities, bonds, and even Bitcoin. Yet, the violent reversal reminded markets that precious metals are as volatile as they are lucrative. Gold's precious metal cousin, silver, dropped 7.5% on the same day.

Such volatility is not uncommon in a heated trading environment. In recent weeks, leveraged trades have amplified swings across assets — from crypto to commodities. Bitcoin's crash on October 10, triggered by cascading liquidations, was a vivid example of how quickly speculative momentum can unwind.

Gold's pullback carried similar fingerprints: overcrowded positions, profit-taking, and mechanical selling by funds managing volatility targets. Still, analysts caution against calling this a full-blown crash.

‘Not A Crash’

Bloomberg's columnist John Authers argues the move should be seen as a "brief hiccup" rather than a structural reversal.

"This is not (yet) a crash, or even a correction," he wrote, adding that the ‘debasement narrative' — fears that excessive fiscal spending and easy money are eroding fiat currency value — remains very much intact.

Ole Hansen, head of commodity strategy at Saxo Bank, said in a post on X that gold could fall as low as $3,973 without breaking its long-term uptrend. He noted that the underlying fundamentals still point to a structural bull market. These include central bank accumulation, persistent ETF inflows, and steady Chinese demand.

"It's during corrections that a market's true strength is revealed, and this time should be no different, with an underlying bid likely keeping any pullback limited," he added.

The Dollar Factor

At its core, gold's success in 2025 has been powered by a two-pronged driver: dollar debasement and de-dollarization.

On one hand, Western deficits, monetary expansion, and political gridlock have weakened faith in fiat currencies. The fear of aggressive fiscal and monetary policies devaluing fiat currencies is driving these market dynamics.

Citi's senior executives, Dirk Willer and Alex Saunder, recently explored the topic, concluding that the debasement trade hangs on this narrative. A narrative, not a fact, narrowly focused on gold – yet very much present in the market.

Meanwhile, emerging markets and BRICS have been the second factor. By accelerating efforts to reduce reliance on the U.S. dollar in trade and reserves, they have turned to gold as a hedge.

While the market licks its wounds from gold's sudden drop, the underlying story hasn't changed. The world's oldest store of value may have stumbled, but the forces driving its rise are still very much alive.

Price Watch: SPDR Gold Shares ETF is up 52.89% year-to-date.

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