On Tuesday (May 13), during the early Asian trading hours, the gold market is still reeling from the shock of "Black Monday." Spot gold is hovering around $3,238 per ounce, with the market sentiment in recovery. In the previous trading session, the gold price took a sudden hit, plummeting nearly 3% in a single day, marking the worst daily drop since 2025.
Comprehensive Review of Gold's Price Crash: Safe-Haven Assets Under Unprecedented Selling Pressure
On May 12, the global financial market experienced a sudden upheaval, with gold bulls facing a collective defeat. Spot gold at one point plunged to $3,207.73 per ounce, closing at $3,234.79. The main COMEX gold futures contract fell 3.5% to $3,228, presenting a long bearish candlestick on the daily chart, leaving the market in shock.
The plunge was triggered by a dramatic easing in U.S.-China trade relations. A joint statement between the U.S. and China announced a significant reduction in punitive tariffs: the U.S. reduced tariffs on Chinese goods from 145% to 30%, and China reduced tariffs from 125% to 10%. This 90-day "truce agreement" far exceeded market expectations, leading investors to swiftly exit gold and other safe-haven assets.
Three Major Negative Factors Combined to Overwhelm Gold
- Reduction in Safe-Haven Appeal:
Gold has long been considered a "treasure in troubled times." However, with the warming U.S.-China relations, its appeal as a safe-haven asset has sharply declined. Adrian Ash from BullionVault noted that the market's repeated reactions to the White House policies ultimately became the catalyst for the drop in gold prices. - Strengthening of the U.S. Dollar Suppresses Gold Prices:
The U.S. dollar index surged 1.5% on the same day, surpassing the 101 threshold to 101.97, the highest in nearly two months. The strengthening dollar makes gold more expensive for overseas buyers, and combined with rising U.S. bond yields, this dual factor reduces gold's attractiveness. - Funds Flowing into Risk Assets:
Investors quickly reallocated to risk markets. The S&P 500 rose 3.26%, and the Nasdaq soared 4.35%, with the VIX fear index falling below 20. UBS analysts commented, “When stock returns exceed the annual gain of gold in a single day, funds naturally flow into the stock market.”
Market Undercurrents: The Turning Point for Gold May Not Be Far
Despite the temporary retreat of safe-haven sentiment, potential market variables remain noteworthy:
- Uncertainty in Federal Reserve Policy:
Chicago Federal Reserve President Goolsbee pointed out that the remaining 30% tariffs could still bring stagflation pressures. Although the market widely expects the Fed to delay rate cuts until September, if this week's CPI data is higher than expected, it may reignite gold's anti-inflation appeal. - Geopolitical Risks Still Linger:
Rising tensions between India and Pakistan, and the unclear prospects of Russia-Ukraine peace talks, all pose potential geopolitical black swan events. ABN AMRO warned, “Selling gold now is like throwing away an umbrella on a rainy day.” - Physical Demand Might Support Gold Prices:
Citibank analysis suggests strong physical buying support below $3,200, especially with the Indian wedding season demand about to begin.
Does Gold Have Another "Golden Age" Ahead?
In the short term, the market still needs time to digest the sudden market changes. Goldman Sachs lowered its three-month gold price forecast to $3,150 but maintains the year-end target at $3,600, citing “the irreversible trend of global central banks buying gold and the process of debt monetization.”
