Global gold prices witnessed their steepest single-day fall since the early 1980s on Friday, plunging as much as 12%, as a sharp rally in the US dollar triggered a dramatic reversal in bullion markets that had rallied aggressively over the past year. The sell-off spilled over into equity markets, with shares of major gold mining companies sliding sharply in Wall Street trading.
Spot gold prices, which had surged to record levels earlier this week, crashed below the USD 5,000 per ounce mark, erasing a large part of January’s gains in a single session. Until Thursday, gold had rallied to nearly USD 5,600 per ounce, driven by geopolitical uncertainty and speculation around the future direction of US monetary policy.
Market participants attributed the sudden reversal to easing concerns over the independence of the US Federal Reserve following the nomination of Kevin Warsh as the next chair of the central bank. The development triggered a powerful rebound in the US dollar, which posted its strongest single-day rise since May, weighing heavily on precious metals.
A stronger dollar typically exerts downward pressure on gold and silver prices, as it makes non-interest-bearing assets less attractive to investors and more expensive for buyers using other currencies. Traders said Friday’s move reflected a rapid reassessment of interest-rate expectations, with markets pricing in a more hawkish policy stance than previously anticipated.
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Gold’s rally through 2025 and early January had been fuelled in part by fears that the Federal Reserve could come under political pressure to cut rates sharply once the current chair’s term ends in May. Speculation around potential candidates perceived as dovish had added momentum to the rally, pushing gold deep into overbought territory.
The nomination of Warsh, widely regarded as an inflation hawk despite his recent comments supporting lower rates, helped calm those fears. Analysts said his appointment reassured markets about policy continuity and central bank independence, prompting a swift repositioning across currencies and commodities.
Technical indicators also amplified the sell-off. Gold’s Relative Strength Index (RSI) had surged to nearly 90, well above the threshold of 70 that signals overbought conditions. The extreme positioning left prices vulnerable to a sharp correction once sentiment turned.
Adding to the volatility, market participants pointed to the unwinding of speculative positions. According to analysts at Goldman Sachs, part of the earlier surge was driven by short covering and options-related hedging activity. As prices reversed, those positions were rapidly unwound, accelerating the decline.
The rout in bullion markets triggered heavy losses in mining stocks. Shares of leading global producers, including Newmont, Barrick Mining, and Agnico Eagle Mines, fell between 11% and 13% in US trading, reflecting concerns over margins if lower prices persist.
Silver prices also came under intense pressure, extending losses alongside gold as investors exited precious metals across the board. The broader commodities complex remained volatile, with traders closely watching currency movements and signals from central banks.
Despite the sharp correction, analysts cautioned against reading the move as the end of gold’s longer-term appeal. Persistent geopolitical risks, elevated global debt levels and uncertainty around the pace of interest-rate cuts later in the year could continue to support prices over the medium term.
However, Friday’s crash serves as a reminder of how quickly sentiment can shift in heavily crowded trades. Market participants said near-term price action is likely to remain volatile as investors reassess rate expectations, dollar strength and the trajectory of global growth.
For now, the dramatic plunge marks a decisive break from gold’s near-vertical rally and underscores the growing influence of currency movements and policy signals in shaping commodity markets amid an uncertain global economic landscape.
About the author – Rehan Khan is a law student and legal journalist with a keen interest in cybercrime, digital fraud, and emerging technology laws. He writes on the intersection of law, cybersecurity, and online safety, focusing on developments that impact individuals and institutions in India.
