Gold prices fell sharply across European markets on Wednesday, extending heavy losses for a second straight day and hitting a two-week low, nearing a drop below the psychological $4,000-per-ounce level amid accelerating profit-taking and rising optimism over global trade, which reduced demand for safe-haven assets.

Prices also came under pressure from continued strength in the US dollar against a basket of major currencies, as investors focused on buying the greenback as the best available investment in the foreign-exchange market.

Price Overview

• Today’s gold prices: Spot gold fell 2.9% to $4,004.56 — the lowest since October 10 — down from the opening level of $4,124.91, after hitting a session high of $4,161.19.

• On Tuesday, gold lost 5.3%, its biggest daily drop since August 2020, as rapid profit-taking followed a record high of $4,381.73 per ounce.

Trade Optimism

US President Donald Trump said he expects to reach a “fair trade deal” with Chinese President Xi Jinping when they meet next week in South Korea and downplayed the risk of confrontation over Taiwan.

India’s Mint newspaper reported that New Delhi and Washington are close to finalizing a long-awaited trade agreement that would lower US tariffs on Indian imports from 50% to 15%.

US Dollar

The dollar index rose 0.1% on Wednesday, marking its fourth straight session of gains and reaching a one-week high of 99.06, reflecting continued strength in the US currency against major and minor peers.

The dollar’s advance came as investors concentrated on buying the greenback as the most attractive asset for now, especially as several major central banks — in the UK, Japan, Canada, and Australia — are expected to adopt more accommodative monetary policies to support slowing economies.

Outlook for Gold

• Matt Simpson, senior analyst at StoneX, said: “Easing trade tensions between the US and China was the small spark that triggered gold’s collapse after a strong rally.”

• Simpson added: “What we’re seeing now is simply a technical repositioning in a market that clearly needed a correction after its prolonged move above $4,000. I believe the worst of the daily volatility is likely behind us, and any new pullbacks in prices will probably be seen as buying opportunities.”

SPDR Fund

Holdings in SPDR Gold Trust — the world’s largest gold-backed exchange-traded fund — were unchanged on Tuesday, with total holdings steady at 1,058.66 metric tons, the highest since June 24, 2022.

The British pound rose slightly in European trading on Friday against a basket of global currencies, heading toward its first gain in four sessions against the US dollar, supported by a pause in the greenback’s recent rally in the foreign exchange market.

Following upbeat economic data from the United Kingdom, doubts increased about the likelihood of a Bank of England rate cut in November. To reassess these expectations, investors are awaiting key inflation data due later today.

Price Overview

• Today’s pound exchange rate: The pound rose 0.1% to $1.3380 from the opening level of $1.3371, after hitting a low of $1.3364.

• On Tuesday, the pound fell 0.3% against the dollar, marking its third straight daily loss, as investors favored the US dollar as the best alternative investment.

US Dollar

The dollar index fell 0.1% on Wednesday, retreating from a one-week high and heading for its first loss in four sessions, reflecting a pause in the US currency’s advance against a basket of global peers.

This pullback came amid expectations that the US government shutdown could continue into November, after President Donald Trump rejected a request from senior Democratic lawmakers on Tuesday to meet before the end of the ongoing three-week shutdown.

UK Interest Rates

• Recent data from London showed that average wages in the UK rose at the fastest pace in three months in August, while the British economy grew better than expected during the same period.

• As a result, market pricing for a 25-basis-point rate cut by the Bank of England at its November meeting dropped below 50%.

UK Inflation Data

To reprice current rate expectations, investors are awaiting key UK inflation figures for September, which are expected to have a strong impact on the Bank of England’s monetary policy outlook.

At 07:00 GMT, the overall Consumer Price Index (CPI) is expected to rise 4.0% year-on-year in September, up from 3.9% in August, while the core CPI is forecast to rise 3.7% year-on-year, up from 3.6% the previous month.

Outlook for the British Pound

According to our estimates here at Economies.com, if UK inflation data come in above market expectations, the likelihood of a Bank of England rate cut before year-end will decrease — potentially leading to further gains for the pound against a basket of major currencies.

The Japanese yen rose in Asian trading on Wednesday against a basket of major and minor currencies, attempting to recover from a one-week low against the US dollar and heading toward its first gain in four sessions, as safe-haven demand for the yen rebounded amid sharp market volatility following gold’s massive losses.

Investors continue to assess the new Japanese government led by Sanae Takaichi, who officially became the country’s first female prime minister after a decisive parliamentary vote on Tuesday.

Price Overview

• Today’s yen exchange rate: The dollar fell about 0.3% to ¥151.49, down from the opening level of ¥151.93, after touching a high of ¥151.96.

• On Tuesday, the yen ended down 0.8% against the dollar, its third straight daily loss, hitting a one-week low at ¥152.17 following the parliamentary vote to elect Japan’s new prime minister.

Sharp Market Volatility

The sharp drop in gold prices triggered broad volatility across global markets, as investors rebalanced their positions among safe-haven assets, led by a notable rebound in demand for the Japanese yen as a defensive hedge during uncertain times.

Gold fell 2.9% on Wednesday, extending steep losses for a second consecutive day to reach $4,003.39 per ounce amid a broad decline in precious metals.

The metal had already lost more than 5% on Tuesday — its biggest one-day drop since 2020 — as rapid profit-taking followed an extended rally that had repeatedly pushed gold to record highs.

Sanae Takaichi

In a historic first, Japan on Tuesday turned a new page in its political history as Sanae Takaichi was elected prime minister, becoming the first woman ever to hold the nation’s highest office.

Takaichi won the position after a decisive parliamentary vote. According to NHK, she secured 237 votes in the first round, eliminating the need for a runoff in the 465-seat lower house.

Her victory came after the ruling Liberal Democratic Party (LDP) formed a coalition with the Japan Innovation Party. Reports indicate the two sides signed an agreement over the weekend to establish a coalition government.

According to Reuters, Takaichi agreed to support several Japan Innovation Party policies, including reducing the number of parliamentary seats, offering free secondary education, and freezing the food consumption tax for two years.

Earlier this month, Takaichi faced a major political setback after the LDP’s abrupt split from its long-time coalition partner, the Komeito Party, which had been allied with it for more than 26 years.

A close political ally of the late Shinzo Abe, Takaichi is known for her support of the stimulus policies that defined “Abenomics,” raising expectations she will pursue an expansionary economic approach that could benefit Japan’s stock market but keep the yen under pressure due to continued monetary easing.

After winning leadership of the ruling party, Takaichi pledged to strengthen Japan’s economy through aggressive spending and criticized the Bank of Japan’s recent interest-rate hike.

Japanese Interest Rates

• Bank of Japan Governor Kazuo Ueda said last week that the central bank remains prepared to raise its key interest rate if prospects for growth and inflation improve.

• Following Ueda’s remarks, market pricing for a quarter-point rate hike at the October meeting rose from 25% to 35%.

• Yen swap markets now imply a 50% chance of a rate hike by December, up from 41% before Ueda’s comments.

• Investors are awaiting further data on inflation, unemployment, and wage growth in Japan to reassess these expectations.

Gold prices fell sharply on Tuesday after hitting record highs the previous day, as investors rushed to take profits, triggering a sudden and steep sell-off that surprised many who had expected the precious metal’s rally to continue.

Gold recorded its worst single-day decline since 2013, dropping about 6.3% in one session — one of the largest daily moves in the precious metals market over the past decade. Spot gold fell from a record high of around $4,381 per ounce to an intraday low of $4,082.

The sharp decline resulted from a combination of factors, including profit-taking after a prolonged rally, easing geopolitical tensions — particularly in US-China trade relations — a stronger US dollar, and technical indicators signaling overbought conditions.

Silver drops 7.5% as investors exit safe-haven assets

Silver prices also plunged on Tuesday, falling around 7.5% to a low near $47.12 per ounce, marking one of the biggest single-day declines in recent years and tracking gold’s historic sell-off.

The fall in silver reflected investors’ exit from both safe-haven and industrial metals as the stronger US dollar made dollar-denominated commodities more expensive for holders of other currencies.

Positive developments in US-China trade talks — including the upcoming meeting between Presidents Donald Trump and Xi Jinping — further reduced demand for precious metals as safe-haven assets. In addition, technical indicators triggered sell signals after silver reached overextended price levels, prompting a wave of profit-taking.

Despite the short-term correction, the fundamental outlook for silver remains strong, supported by growing industrial demand in areas such as solar energy, electric vehicles, and artificial intelligence, as well as steady central bank purchases and ETF inflows that continue to support prices over the medium and long term.

Strong US dollar adds pressure to metals

The US dollar has strengthened notably in recent days, with the Dollar Index (DXY) reaching around 98.91 on October 21, 2025 — its highest level in about a week and up 0.33% from the previous session.

The dollar’s rise was driven by optimism over a resolution to the US government shutdown and improving expectations for a fair trade deal between Presidents Trump and Xi, which boosted confidence in the US economy.

The greenback is also supported by expectations that the Federal Reserve will cut interest rates soon. Investors anticipate a 25-basis-point reduction next week, with potential for further cuts thereafter.

Although the dollar has gained about 1.6% over the past month, it remains down roughly 5% year-to-date. A stronger dollar raises the cost of dollar-priced assets such as gold and silver for foreign investors, adding selling pressure to commodity markets.

Profit-taking and shifting geopolitical sentiment behind the sell-off

Many analysts believe today’s sharp drop in gold prices is primarily due to profit-taking after the metal reached record highs. Investors who bought earlier in the year chose to lock in gains rather than risk exposure to a potential correction.

Easing geopolitical tensions and improving international trade relations also contributed to a shift in sentiment toward riskier assets such as equities, reducing demand for gold as a safe haven.

Gold market outlook and next moves

Traders and short-term speculators are closely watching upcoming economic data, especially inflation figures and Federal Reserve policy updates, which will shape gold’s direction in the coming weeks.

Despite current volatility, analysts maintain that gold remains an attractive long-term investment, recommending that investors view price dips as strategic buying opportunities rather than panic-selling during temporary corrections.

Experts emphasize that recent moves highlight the importance of portfolio diversification: while gold offers protection against inflation and uncertainty, balanced portfolios with a mix of asset classes provide more effective risk management.

Many investors see the current decline as a potential buying opportunity, as historical patterns suggest gold often rebounds strongly after steep corrections, particularly amid ongoing global economic uncertainty.

Looking ahead, gold prices are expected to remain volatile, influenced by investor sentiment, dollar strength, geopolitical developments, and central bank decisions. Market experts advise close monitoring and prudent risk management in the period ahead.