Gold Continues Its Correction, Hits New Lows
Introduction: The End of a Historic Gold Rally
Gold, long seen as the ultimate safe haven, has been undergoing a dramatic correction since mid-October 2025, marking a major shift after a year of record highs. After breaking through the symbolic $3,900 per ounce mark in early October, the yellow metal suffered a sharp drop, breaching several key technical support levels. This move, which caught even seasoned investors off guard, reflects a rapidly changing market dynamic where caution is now overtaking euphoria.
This trend reversal is significant: it comes amid a global environment marked by a resurgence in equity markets, stabilization in US interest rates, and widespread portfolio rebalancing. To understand the drivers behind this correction and its implications for investors, we need to look back at recent excesses, the underlying causes of the drop, and the outlook now emerging for the gold market.
An Unprecedented Rally in 2025: From Record Highs to Overheating
A Year of All-Time Highs
2025 started off on a high note for gold: between January and October, the precious metal notched a series of all-time highs, fueled by geopolitical uncertainty, turmoil in the bond markets, and a global flight to safe-haven assets. According to Gold.fr, gold prices in euros surged 34% since the start of January, while the dollar price flirted with $4,000 per ounce in early October—a gain of over 44% in twelve months.
This rally was marked by several key milestones:
Gold outperformed all major stock indices, with the CAC 40 rising just 8% over the same period.
A Speculative Bubble Fueled by FOMO
This bullish momentum was accompanied by an unprecedented wave of speculation. Many retail and institutional investors jumped into the market, driven by a fear of missing out (FOMO). The mood was all about chasing records, with every dip quickly bought up.
But this frenzy eventually led to an “overbought” market: technical indicators like the RSI (Relative Strength Index) were flashing warning signs of overheating. The market became saturated with long positions, often highly leveraged, with automatic stop-loss orders poised to trigger at the slightest jolt.
Violent Correction: Gold Under Pressure as Technical Supports Collapse
The Shock of October 21: A Black Day
Everything changed on October 21, 2025. In just a few hours, gold lost 5.5%—its biggest single-day drop since 2020, according to Infonet.fr. This plunge was triggered by a perfect storm of negative factors:
Technical selling then snowballed, amplified by trading algorithms and the unwinding of speculative positions. Stop-loss orders were triggered in rapid succession, accelerating the price collapse.
The Correction Accelerates: Supports Broken, New Lows Hit
The downward momentum didn’t stop there. Between October 21 and 27, gold continued its technical correction, losing nearly 9% in six days according to Veracash. The slide was exacerbated by a mass exodus of speculative investors, who fled the market at the first signs of weakness.
The key technical support at $3,972 broke overnight on October 27-28, opening the door for a retreat toward the next technical zone around $3,850. Several analysts warn that the correction could continue to this level—or even lower—if selling pressure persists.
The Deeper Causes of the Correction: Technical and Macroeconomic Factors
A Natural Cooldown After Euphoria
The current correction is first and foremost a logical cooldown after a period of overheating. The market had become overloaded with long positions, with most investors betting on further gains. At the first signs of weakness, profit-taking and the triggering of automatic orders created a snowball effect.
Unfavorable Macroeconomic Factors
Beyond technical reasons, several macroeconomic factors contributed to gold’s decline:
According to several observers, the return of risk appetite—combined with easing long-term US rates—redirected investment flows toward other asset classes.
Market and Investor Reactions and Impacts
Portfolio Rebalancing: A Time for Caution
In response to gold’s correction, many institutional and retail investors have rebalanced their portfolios. Recent strategies reflect a more cautious approach:
Gold-backed ETFs and ETPs have seen assets under management decline, a direct result of large-scale redemptions. According to Insee data, commodity volatility—including gold—peaked in October.
Consequences for French and European Investors
For French and European investors, the message is clear: gold is not immune to dollar cycles or Fed expectations. Even during geopolitical tensions, the yellow metal can experience sharp corrections, especially when the market is overbought.
Technical Analysis: Broken Supports and Key Levels to Watch
Key Short-Term Technical Levels
After the break of the $3,972 support, attention is now focused on the next major technical zone around $3,850. If this level gives way, it could pave the way for a deeper correction, with potential targets at $3,800 and then $3,700 per ounce.
Analysts are also watching:
Possible Scenarios for the Coming Weeks
Three main scenarios are emerging:
In any case, volatility is likely to remain high until the market digests the speculative excesses of recent weeks.
Outlook and Future Trends for the Gold Market
Is Gold Still a Long-Term Portfolio Pillar?
Despite the current correction, gold remains a core safe-haven asset for portfolio diversification. Historically, consolidation phases are a normal part of the commodity cycle. Long-term fundamentals—inflation, geopolitical uncertainty, fiscal imbalances—are still in play.
That said, investors need to adapt to the new environment:
Key Trends to Watch in 2026
Several variables will shape the gold market in the coming months:
Major institutional players, including central banks, are closely monitoring these developments. Their gold buying or selling strategies could once again influence the trend.
Conclusion: A Healthy Correction or a Paradigm Shift?
The correction in gold at the end of October 2025 marks the end of a euphoric cycle and a return to greater market rationality. After months of spectacular gains, the yellow metal is a reminder that it’s not immune to sharp consolidations—especially when speculative positions become excessive.
For investors, this episode is both a warning and an opportunity. While caution is warranted in the short term, gold’s fundamental role in diversified portfolios remains solid. As 2026 approaches, the gold market is entering a new phase—one where risk management and disciplined investing will be key in navigating a landscape where volatility is here to stay.
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❓ FAQ - Frequently Asked Questions
1. What is happening to gold prices now?
Gold has been in a sharp correction since mid-October 2025, after a year of record highs. Following an early-October surge that briefly topped $3,900 per ounce and peaked at $3,984 on October 7, prices reversed hard. The selloff accelerated on October 21 with a 5.5% single-day drop, and continued over the following days, totaling nearly a 9% decline between October 21 and 27. Key technical supports were breached—most notably the $3,972 level—which opened the way toward the next zone around $3,850. This shift reflects a change in market dynamics: a stronger dollar, renewed risk appetite in equities, and profit-taking replaced the prior euphoria. In short, gold has moved from a momentum-driven rally to a technically driven correction, with new short-term lows and elevated volatility.
2. What triggered the sharp drop on October 21, 2025?
October 21 was a “black day” for gold, with a 5.5% decline—the biggest daily fall since 2020. A confluence of factors hit at once: a rebound in the US dollar reduced gold’s appeal to international buyers; markets braced for the US CPI release, which stoked expectations of continued Federal Reserve monetary tightening; and weeks of strong gains invited widespread profit-taking. These fundamental shocks quickly morphed into technical selling: trading algorithms reacted to broken levels, leveraged long positions were unwound, and stop-loss orders triggered in succession. The result was a snowball effect, amplifying the initial move into a violent, fast-paced selloff.
3. Why did a year of record highs lead to a correction?
Gold’s exceptional 2025 rally—driven by geopolitical uncertainty, bond market turmoil, and safe-haven demand—created an overheated, “overbought” market. Investor behavior played a major role: fear of missing out (FOMO) prompted both retail and institutional buyers to chase new highs, often using leverage. Technical indicators such as the RSI were signaling overheating, while the market became saturated with long positions and packed with stop-loss orders. Once the first cracks appeared, profit-taking, margin sensitivity, and automated selling combined to turn a normal pullback into a rapid correction. In other words, the very momentum that propelled prices upward primed the market for a sharper-than-usual reversal.
4. What do “overbought,” “support,” and momentum indicators like RSI/MACD mean here?
In this article’s context: “Overbought” describes a market that has risen too far, too fast—often flagged by momentum tools like the RSI—making it vulnerable to pullbacks. “Support” refers to price zones where declines may pause or reverse; when a key support breaks (e.g., $3,972), it can open room for further downside toward the next levels (such as $3,850). Momentum indicators like RSI and MACD help gauge the strength and direction of price moves. Earlier, RSI signaled overheating during the rally; now, analysts are watching for a return to “oversold” territory, which could signal stabilization or a technical rebound if selling pressure exhausts.
5. How did technical factors amplify the decline?
Several mechanics intensified the drop. High leverage meant many positions were opened on margin, increasing sensitivity to even modest price swings. As prices fell, automatic stop-loss orders were triggered, accelerating the selloff. Algorithmic trading systems, which often react to price levels and momentum, amplified volatility when supports broke. Finally, herd psychology—shifts in sentiment that lead investors to act in unison—turned caution into panic, with each wave of selling prompting more exits. Together, these factors transformed an initial shift in tone into a rapid, self-reinforcing correction.
6. Which macroeconomic factors are pressuring gold now?
Three main macro drivers weighed on gold: a stronger US dollar, a rebound in global equities, and expectations of a hawkish Federal Reserve. A firmer dollar makes gold more expensive for non-US buyers, curbing demand. Rising stock markets revived risk appetite, encouraging investors to rotate from safe havens into risk assets. The prospect of continued restrictive US monetary policy improved the appeal of bonds relative to gold. Observers also note that the return of risk appetite—combined with easing long-term US rates—redirected flows toward other asset classes and away from gold.
7. What key price levels and signals should investors watch?
After the breach of the $3,972 support, attention centers on the next zone around $3,850. If that gives way, potential targets cited include $3,800 and then $3,700 per ounce. Some analysts also consider $3,600 as a deeper downside marker if selling persists. Beyond price levels, volume behavior matters: a sharp drop on heavy volume could indicate capitulation. Momentum indicators (RSI, MACD) are being monitored for a move into oversold territory, which could hint at stabilization or a technical rebound. In short, watch $3,850 first, then the lower rungs if supports fail, alongside volume and momentum cues.
8. How far could the correction go, and what are the scenarios?
The article outlines three scenarios. 1) Stabilization: If the $3,850 area holds, a technical rebound is possible, potentially supported by bargain hunting. 2) Continued correction: If supports break, gold could slide toward $3,700 or even $3,600 before finding a new equilibrium. 3) Resumption of the uptrend: Renewed macro or geopolitical uncertainty could reignite safe-haven demand and reestablish the bullish trend. Across scenarios, volatility is likely to remain elevated until the market works through recent speculative excesses.
9. How are investors reacting, and what portfolio moves are common?
Many investors have rebalanced toward caution. Common steps include building up cash to limit risk, shifting toward government bonds—helped by more attractive US yields—and reducing exposure to commodities, including gold, in the short term. Gold-backed ETFs and ETPs have seen assets under management decline amid large-scale redemptions. According to Insee, commodity volatility, including gold, peaked in October. These adjustments reflect a broader rotation toward perceived safety and income, while investors reassess gold’s near-term risk-reward after the rapid rally and swift correction.
10. What are the implications specifically for French and European investors?
The key takeaway is that gold is sensitive to dollar cycles and Fed expectations. Even during geopolitical tensions, an overbought market can correct sharply. For French and European investors, the recent swings mean: holders of physical gold are experiencing pronounced value fluctuations; recent buyers who entered near the top face unrealized losses; and some wealth managers suggest waiting for prices to stabilize before adding to positions. The episode underscores the importance of timing, risk management, and recognizing that safe-haven assets can still undergo rapid corrections when positioning becomes crowded.
11. Is gold still a long-term portfolio pillar after this correction?
Yes, the article maintains that gold remains a core safe-haven asset for diversification. Corrections and consolidation phases are normal in commodity cycles. Long-term supports—such as inflation concerns, geopolitical uncertainty, and fiscal imbalances—are still relevant. However, the current environment calls for adaptation: algorithmic trading can make moves sharper and faster; gold’s sensitivity to the US dollar and short-term rates is a key allocation driver; and diversification remains essential. In practice, exposure to precious metals should be calibrated with today’s heightened volatility in mind.
12. What trends should be watched in 2026 that could influence gold?
Several variables may shape the market. Changes in US monetary policy—any shift in the Fed’s stance—could quickly reignite or cool interest in gold. Ongoing geopolitical tensions (in regions such as the Middle East, Ukraine, or Asia) may trigger fresh bouts of volatility and safe-haven demand. Finally, the level of risk appetite in equity markets matters: if stocks keep rebounding, flows may continue to move away from gold. Major institutional players, including central banks, are monitoring these factors closely, and their buying or selling strategies could influence the trend.