Gold prices collapsed nearly 5% on Monday, breaking below $4,000 per ounce for the first time in weeks and marking the worst single-day drop in over a decade. Spot gold settled at $3,950 amid frenzied trading, with early Tuesday levels recovering slightly to $4,014. The plunge erased gains built on escalating US-China trade tensions, as fresh diplomatic breakthroughs sapped demand for safe-haven assets.

Citigroup analysts issued a stark downgrade late Monday, cutting their three-month gold target to $3,800 from $4,000—aligning with the 50-day moving average—and warning of further declines toward the 100-day average of $3,600. Silver’s outlook was slashed to $42 from $55, reflecting weakened industrial and investment appetite. “De-escalating geopolitical risks and aggressive profit-taking will drive sustained downside,” the note stated, projecting that even a 2% unwind of $17 trillion in paper profits could overwhelm global mine supply.

President Trump’s Asia tour has accelerated the shift, with preliminary trade frameworks signed with Malaysia, Thailand, Vietnam, Cambodia, Brazil, India, and Taiwan. Negotiators in Kuala Lumpur announced a US-China “framework agreement” averting 157% tariffs and easing rare earth export curbs. Treasury Secretary Scott Bessent called it a “successful blueprint” ahead of Trump’s summit with Xi Jinping in South Korea, boosting market confidence and prompting investors to exit gold positions.

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Central bank buying, a key driver of gold’s 2025 surge from $2,700 to a peak of $4,380, has cooled sharply. The World Gold Council reported a 15% drop in quarterly purchases by major institutions like China and India. A WGC strategist told Bloomberg that this correction could be “healthy,” potentially attracting institutional buyers at lower levels. Meanwhile, an expected end to the US government shutdown adds further pressure on haven assets.

Citi cautioned that gold’s bull run may stall unless trade fears become the “base case” through 2026. Even a 0.1% shift of household wealth out of gold could double effective selling pressure. For investors, the $3,600–$3,800 zone now emerges as a critical support range, with volatility likely to persist until concrete trade deals are finalized.

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