Gold, the traditional "safe-haven baby", recently staged an amazing "high-altitude dive".

London spot gold prices plummeted 6.3% at one point and finally closed down 5.31%, not only the biggest one-day decline in 12 years, but also the top 15 of the worst single-day declines in history. This sudden plunge was described by even Goldman Sachs traders as "collapsing like a demon stock".

From an intraday high of $4,375.59 per ounce on October 21 to $4,107.92 per ounce at the close of trading on Friday, the price of gold fell nearly $268 in just a few days. The cumulative decline for the week is 3.35%, and it also ends the previous 9 consecutive weeks of upward momentum.

But this sharp drop has actually been signaled. Previously, the price of gold rose too sharply, and there have been many technical warnings in the market, such as overbought and bubble risks. The question now is:
is this plunge just a "normal pullback" on the way to the bull market?
Or does it mean that the gold frenzy has completely turned around?

There have been "four major warnings"

The plunge of gold this time has actually had "four warnings", and the market has long been wrong.

Alert 1: U.S. stocks, gold, and the U.S. dollar rose together, which is too abnormal!

Under normal circumstances, if the US dollar is strong, gold will fall; The stock market is good, and everyone doesn't like to buy gold. But before the big drop, there was a strange phenomenon that US stocks rose, gold rose, and even the US dollar rose. Shao Xiang, an analyst at Minsheng Securities, pointed out that this kind of "three rises flying together" situation is very rare, which violates the basic market logic, indicating that the market has been distorted and it is only a matter of time before it adjusts.

Alert 2: Gold has risen too sharply and is seriously "overbought"

Gold is already in a state of "extremely overbought" - to put it simply, there are too many people buying it, it has risen too fast, and the price is far ahead. This year, the price of gold in London has hit a record high 45 times; Since August 21, it has soared nearly 30% in just two months, which is rare in gold bull markets in recent years.

In the past five years, once gold's short-term increase is close to 30%, it will often pull back afterwards, with an average retracement of about 4%. So this sharp drop is more like a technical adjustment of "if you rise too much, you should take a break".

Alert 3: The technical side has reached the "limit level"

In statistical models, gold prices have a "safe upper limit" – usually three standard deviations. Since 2010, every time the price of gold rushes to this position, it will pull back. And this time, the price of gold just hit this "ceiling", indicating that the short-term rally has come to an end.

Alert 4: ETF volatility soars, signaling a change

The "implied volatility" of gold ETFs has risen rapidly recently. This is like the "panic index" of the market, and historical experience shows that once this indicator suddenly jumps, it often means that the market is about to turn around. This time was no exception, it sent a signal in advance to "beware of violent shocks".

There is also a key problem: the transaction is too crowded

During this rise, the scale of gold ETFs expanded rapidly, and a large amount of funds poured in. This is very different from the market at the beginning of the year. This "crowded" trading structure will make the rise more violent, but once it turns, it will also fall faster and harder.

This sharp drop in gold is not accidental. There are both reasons for technical overbought and too much rise, as well as the cooling of risk aversion (such as changes in the situation in Russia and Ukraine). To put it bluntly, it is "can't rise + everyone starts running", so there was a sharp pullback.

Is it a pullback or a peak? Historical data tells you

Will this sudden plunge in gold be a "breather in the middle of the bull market", or will it become a "peak reversal"? No one can say for sure now, but historical data gives us some clues.

Look at the past: There have been 14 similar crashes

Historically, there have been a total of 14 sharp declines like October 21, 2025 (down more than 5.31% in a single day). Among them, 6 times are very similar to the current situation: all in the first half of the year, the price of gold has been rising. But the trend after these 6 times is divided into two factions:

3 times: Gold prices rebounded in half a year, up to 11.7%;

The other 3 times: continued to fall, and the worst one fell by almost 17%.

A particularly dangerous historical case: 1980

The most alarming was on January 11, 1980: in the first half of the fall, the price of gold soared by 39.15%; Then it plummeted by 11.68% in one day; In the following six months, it continued to fall by 16.9%. And this time (2025), the price of gold also rose by 34.97% in the first half of the year, which is very close.

This has made many people worry: will there be a repeat of the 1980 "peak and fall" script?

Another 8 big drops: occurred in a downtrend

The remaining 8 sharp declines occurred when the price of gold was already falling. But interestingly, after these 8 sharp declines, most of the gold prices have rebounded, and the rebound is not small. For example, on April 15, 1980: in the first half of the year, the price of gold had fallen by 21.36%; Half a year after the sharp decline, it rose 36.43%.

This shows that if it is a plunge at the end of the "bear market", it may be the "last fall", followed by a rebound.

There is also a law: it is easy to fall sharply after rising for 9 consecutive weeks

This time, gold has risen for 9 consecutive weeks. Historical data shows that after 9 consecutive weeks of rise, once turned, the maximum decline is usually between 17%~42% (except for the one in 1970); The time of the biggest decline is usually between 23 and 148 trading days after the turning point.

To sum up: the current situation is unclear. Although this plunge is very similar to the peak before 1980, it is worrying; But history has also proven that a sharp decline after a big rise may continue to fall or rebound soon.

The key depends on the trend in the next few weeks: will it stop falling and rebound, or will it continue to break downward? The answer may be revealed in the near future.

Some people are desperately bearish, and some are resolutely bullish

Bearish: Gold has become an "Internet celebrity stock", and the bubble is too big!

"Old debt king" Gross (co-founder of PIMCO) fired: This year's gold is no longer like a safe-haven asset, but like a "meme stock" (like an Internet celebrity stock that has been hyped up by retail investors like a game station).

Goldman Sachs also admitted that the trend chart of gold looks like a "demon stock crash". Fund manager Joe Teague warned: The market's enthusiasm for gold has gone "crazy" and the precious metal is in a bubble. "Purchases of physical gold are already ridiculously high," he said. ”

He also wrote: "I have been bullish on gold for many years, but the current situation is keeping me awake. Everyone is saying that there is a bubble in the stock market, but no one asks if gold is too high? When everyone thinks that gold is 'steady profit and no loss', it is precisely the moment when we should be most vigilant. ”

Look at the multi-faction: the pullback is normal, and it has to rise in the long run!

But JPMorgan remains firmly bullish. They said in a report on October 23: This decline is just a normal correction to digest the previous rapid gains.

Natasha Kaneva, head of commodities at the bank, explained: "The price of gold has risen too much, and it is normal for many people to be afraid now. But the logic is simple - there are too many buyers and too few sellers. ”

What do you think about the future?

Short-term (next 3-6 months): The price of gold may fluctuate sharply, and if it rises quickly, it is easy to fall sharply, and technical selling pressure is inevitable. However, the general environment is still loose: sufficient liquidity, coupled with the uncertainty brought about by AI development, will promote safe-haven demand and benefit gold.

Before next year's U.S. election: The White House may pressure the Fed to continue cutting interest rates in order to stimulate the economy, weakening the Fed's independence. This "political risk" will also push gold higher.

The next key is to see if the market can stabilize and how the Fed and the global situation go.