Gold and silver futures plunged Tuesday, with gold in particular having its worst day in more than 12 years, after both precious metals recently ran up to record highs.
Why it matters: Investors may be coming to grips with a disconnect between the surge in the traditional safe havens and actual fundamentals.
By the numbers: Gold futures fell more than 5%, while silver futures dropped more than 6%.
- Per Dow Jones data cited by the Wall Street Journal, gold hasn't fallen 5% in a single trading day since June 2013.
- Before Tuesday, both metals had risen about 60% this year.
What they're saying: "I've been bullish on gold for years. But what I'm seeing now keeps me up at night," Joe Tigay, portfolio manager of the Rational Equity Armor Fund, wrote in a note Tuesday, citing reports of people lining up in the streets of Australia in recent days to buy gold.
- "When people line up in the streets to buy an asset, when the narrative becomes one-sided, when the trade gets this crowded — that's your signal," Tigay wrote.
- "I don't care what the asset is. This is how manias end."
The intrigue: As gold's sell-off accelerated, both the U.S. dollar and bitcoin rallied, with the cryptocurrency in particular gaining almost 5% in two hours during the morning.
- Market experts have said at least some of the rally in gold this year can be attributed to investors wanting exposure to U.S. corporate performance without the risk of the dollar itself.
- Stock markets took little notice of the plunge, with shares roughly flat on the day — other than sharp drops for miners like Newmont, and ETFs tied to the metals.
What to watch: Whether Tuesday's sell-off is a one-day blip or the start of a more lasting pullback.
- "However painful it may feel for latecomers to the gold rally, the metal could withstand a 10% correction to around USD 3,973 without breaking its bullish narrative," wrote Ole Hansen, head of commodity strategy at Saxo Bank, in a post on X.
Madison Mills and Brady Dale contributed.
