Gold has recorded its largest drop in five years
22 OCT, 2025
By Claudio Wewel from J. Safra Sarasin
Claudio Wewel, Currency Strategist at J. Safra Sarasin Sustainable AM
Yesterday’s correction comes after gold reached new all-time highs, approaching $4,400 per troy ounce on October 20.
The precious metal had gained 11% in September alone, followed by another 12% in October, before experiencing the decline seen yesterday.
We attribute the recent pullback to broad profit-taking, driven by a combination of factors.
Political news flows have recently become more favorable, after President Trump hinted earlier this week at the possibility of a trade deal between the U.S. and China (though likely a limited one). In addition, The Wall Street Journal reported that the Trump administration is allegedly “quietly rolling back” some tariffs, particularly on goods that the U.S. does not produce domestically. These developments have sparked a moderate “risk-on” move in equity markets, reducing demand for safe-haven assets. It’s worth noting that this profit-taking is also occurring amid a strengthening U.S. dollar and ahead of Friday’s U.S. inflation data release, as any upside surprise could dampen expectations for further rate cuts.
Although the coming days are likely to remain volatile, we believe the fundamentals supporting a renewed rise in gold prices remain solid over the medium to long term.
Geopolitical uncertainty continues to be very high. This was evident in recent days with the cancellation of the meeting between Trump and Putin in Budapest.
We consider it unlikely that the conflict between the U.S. and China will be fully resolved, making it probable that the truce could break down again.
Gold remains underweight in portfolios; therefore, we expect investors who have previously stayed away from the metal to continue turning to it and increasing their positions.
Institutional buying should remain another key support factor, providing a floor for gold prices, as central banks seek to diversify their reserves away from dollar assets and are likely to take advantage of corrections to buy opportunistically.
The growing interest from stablecoin issuers, combined with increased outflows from crypto investments, represents additional upward pressure on gold.
