Gold’s Meltdown: The Biggest One-Day Crash in a Decade Shocks Global Markets

The gold market suffered one of its most violent single-day reversals in modern history Tuesday, abruptly ending a near-parabolic rally that had captivated investors for most of 2025. Spot prices collapsed more than 6% to just under $4,100 per ounce, while December futures settled down $250, or 5.7%, at $4,109.10—marking the steepest daily fall since 2013 and only the 44th drop of this magnitude since the end of Bretton Woods in 1971. The move came a day after gold futures hit a record $4,374, capping an extraordinary run fueled by global uncertainty, central bank buying, and unrelenting liquidity. Silver plunged even harder, off more than 8%, underscoring just how stretched sentiment had become across precious metals.

The selloff followed an extraordinary run-up that peaked on October 20, when gold surged 3.35% to $4,359.40—its second-best session since the pandemic shock of March 2020. That day marked the 10th consecutive week of gains for gold ETFs, with SPDR Gold Shares (GLD) logging a record close at $401.40 and extending its year-to-date rally to 66%. The move was part of a broader “crack-up boom” in private-sector assets—a term Ludwig von Mises coined to describe speculative euphoria driven by excessive liquidity. In 2025, that liquidity has been abundant: the Federal Reserve’s renewed easing cycle, trillions in global money market cash, and sustained central bank purchases have pushed both equities and commodities into overextended territory. But by Tuesday, the rubber band had stretched too far.

As Truist Advisory’s Keith Lerner put it, “Much like a rubber band that becomes stretched too far, the eventual snapback can be sharp.” Gold had climbed more than 65% for the year, accelerating in recent weeks to trade over 30% above its 200-day moving average—the largest deviation since 2006. Daily declines exceeding 5% are exceedingly rare in this market, historically clustering near cyclical inflection points or the late stages of speculative upswings. Lerner’s team notes that one-year returns after such events are negative more often than not, with gains in only about 40% of cases—evidence that while short-term bounces are common, structural corrections tend to follow.

This recent surge didn’t occur in a vacuum. Over the past two years, gold’s share of global investment portfolios has climbed from 4% to 6%, its highest since 1986, according to Goldman Sachs. That might not sound extreme—until viewed against the backdrop of history. During the 1980 blow-off top, gold accounted for roughly 22% of global investment allocations, coinciding with double-digit inflation and collapsing equity valuations. By contrast, today’s surge reflects less fear of inflation and more flight to safety amid geopolitical volatility, fiscal stress, and an overextended stock market. Capital has poured into tangible assets—gold, silver, land, and even bitcoin—while sidelined cash in U.S. money markets has swelled past $7.3 trillion, reflecting investor unease with both bonds and equities.

Technically, the setup for reversal was clear. Gold had repeatedly tested resistance above $4,400 last week, failing each time. The break lower was exacerbated by algorithmic trading and position unwinding once $4,250 gave way. Key support now lies at $4,000—a psychologically significant level and the first line of defense for bullish traders. Beneath that, technicians highlight $3,850 as the 50-day moving average and $3,600 near the 100-day, where deeper corrections could unfold if liquidation accelerates. On the upside, resistance remains entrenched between $4,250 and $4,400—levels likely to cap any near-term rebound unless fresh macro catalysts re-emerge.

Who’s been buying and selling? Central banks—particularly in China, Turkey, and the Middle East—have been steady net buyers for over a year, seeking insulation from dollar volatility and sanctions risk. Retail and ETF flows, by contrast, have shown speculative froth. U.S. futures positioning had tilted heavily long heading into this week, with open interest at multi-year highs. When trade tensions eased and the dollar strengthened, fast money began to unwind, triggering cascading stop-losses across the futures complex. Citi’s commodity desk now expects consolidation over the next 2–3 weeks, pegging a near-term target of $4,000.

The macro backdrop helps explain both the rally and the rout. Gold has historically tracked long-cycle liquidity trends rather than inflation per se. Since 2013, the U.S. has been in what long-cycle theorists call a “reflationary expansion”—akin to the 1940s–1960s, when equities and interest rates rose together while commodities lagged. Yet the post-COVID period distorted this rhythm: emergency fiscal and monetary measures created a liquidity overshoot, driving nearly every private asset class—stocks, housing, crypto, and now gold—into simultaneous bull markets. The result has been an anomalous overlap of reflationary and speculative cycles. As liquidity remained high even amid rate hikes, gold’s historical counter-cyclical role blurred, transforming it from an inflation hedge into a liquidity barometer.

The October 20 blow-off thus fits into a broader pattern of speculative excess. A long-cycle model shows that the S&P 500/gold ratio—historically a reliable marker of secular turns—had begun to roll over months earlier, hinting at equity underperformance relative to hard assets. That shift sparked fears that the current reflationary cycle might be nearing exhaustion. Yet paradoxically, Tuesday’s washout may signal the opposite: a rebalancing within the ongoing expansion, where equities regain leadership and gold consolidates before its next leg higher.

Despite the carnage, structural demand for gold remains intact. Central banks continue diversifying reserves, real yields are easing again, and geopolitical flashpoints persist. Analysts at Truist and Citi both characterize the current move as a healthy correction within an early-stage upcycle. The long-term target range of $4,500–$5,000 remains plausible, but traders should expect interim volatility. In historical context, similar overbought episodes in 1979, 2011, and 2020 all saw corrections of roughly 20–25% before resuming upward trajectories.

For now, all eyes are on the $4,000 level. A decisive hold there could entice dip buyers back in around $4,200, but a break lower risks deeper retracement toward $3,850. On the other side, reclaiming $4,250 would suggest stabilization, while a weekly close above $4,400 would put record highs back in play. With gold still up over 50% year-to-date, the metal’s longer-term appeal as both hedge and momentum trade remains—but after this week’s rout, it may finally be reminding investors of an old truth: even the strongest safe haven isn’t immune to a liquidity storm.