Gold, After Hitting Record Highs, Plunges for the First Time in 12 Years
Gold, After Hitting Record Highs, Plunges for the First Time in 12 Years
※ International gold prices, which had surged nearly 60% this year and kept setting record highs, just posted their largest drop in 12 years.
As the dollar strengthened and U.S. corporate earnings beat expectations, investors rotated out of the safe haven (gold) into risk assets, accelerating profit-taking.
This correction reflects a mix of overheated short-term gains, profit taking, and uncertainty around U.S. rate policy. 😅
The global gold market flipped abruptly.
After steadily climbing and marking fresh highs day after day, gold prices fell sharply in a single session.
According to Reuters, on the 18th (local time) spot gold slid over 6% intraday to $4,082/oz, its steepest daily fall since 2013 and the first time since June 2013 that gold dropped more than 5% in a single day.
On COMEX, December gold futures also fell, closing at $4,109/oz, down 5.7% from the prior session.
The multi-month rally reversed in an instant.
💬 Three Drivers Behind the Drop
① Stronger U.S. Dollar
With the greenback strengthening against major currencies, gold’s appeal diminished.
Because gold is dollar-denominated, a stronger dollar makes it feel more expensive in other currencies, nudging investors toward the dollar or U.S. Treasuries.
② Expectations of U.S.–China Tension Easing
After the U.S. president hinted at possible trade de-escalation ahead of an APEC meeting in Gyeongju with China’s leader, markets leaned into reduced uncertainty, prompting flows back to risk assets (equities and cyclicals).
③ Strong U.S. Corporate Earnings
With Q3 results beating estimates, equity inflows accelerated—particularly into tech.
As the Nasdaq rebounded, demand waned for non-yielding assets like gold.
📉 A Broad Precious Metals Pullback
The sell-off wasn’t confined to gold. Silver fell 7.6%, and platinum dropped 5%, signaling not just a blip but a broader turn toward risk-on across asset classes.
💵 The Rate Variable
Investors are again focused on the Federal Reserve.
Since gold pays no interest, it tends to rise when real rates (nominal minus inflation) fall.
If inflation cools but the pace of rate cuts slows, gold’s rebound could be capped in the near term.
📊 Market & Equities Analysis
1️⃣ U.S. Equities
- Tailwinds
- Gold selling often equals risk appetite returning.
- Improved sentiment can aid mega-cap tech, AI, and semiconductors.
- A steadier rate backdrop plus dollar strength can support financials.
- Headwinds
- If the gold plunge is read as a liquidity shock, bond-market volatility could spill into a brief equity correction.
🟢 U.S. Stock Ideas
| AI/Semiconductors | NVIDIA (NVDA) | If rates stabilize and risk appetite improves, leadership can reassert. |
| Financials | JPMorgan (JPM) | Stable rates and loan demand can lift NII and profitability. |
| Industrials | Caterpillar (CAT) | Cyclical upturn & infra outlays benefit heavy equipment. |
| Gold ETF | SPDR Gold Shares (GLD) | Consider staged buying in a corrective phase. |
2️⃣ Korea Equities
- Tailwinds
- Better U.S. earnings can draw foreign inflows into Korea.
- KRW stabilization favors exporters (semis, autos).
- Some domestic funds may reallocate from gold ETFs back to equities.
- Headwinds
- Redemptions or loss-cut activity in gold/silver ETFs could add short-term volatility.
🟢 Korea Stock Ideas
| Semiconductors | Samsung Electronics (005930) | AI server cycle and memory recovery leverage. |
| Batteries | LG Energy Solution (373220) | Foreign flows return as dollar pressure eases. |
| Financials | KB Financial (105560) | Earnings stability in a steady-rate regime. |
| Equity ETF | KODEX S&P500 TR | A representative ETF play during risk-on phases. |
💡 Investment Insight
This gold slump signals a shift from risk-off to risk-on.
After a sharp drop, a technical bounce in gold is possible, but for allocation, consider tilting toward growth assets (AI, semiconductors, infrastructure cyclicals) while keeping partial hedges (gold or USD ETFs) against rate-path and macro shocks.
❓ FAQ
Q1. Is the gold plunge just a short-term correction?
A. Largely profit-taking after an extended run. If dollar strength persists, further downside can’t be ruled out.
Q2. Is now a good time to buy gold?
A. Long-term, staged entries are reasonable; near-term volatility calls for caution.
Q3. Which assets suit Korean investors now?
A. Tech/AI/EV-battery leaders in the U.S. and Korea look more attractive relative to gold in the current tape.
Q4. Would renewed rate cuts lift gold again?
A. Yes—declining real rates typically support gold, though the rebound could be gradual.