• Gold prices tumbled below the critical $4,100 level, extending a steep selloff driven by reduced safe-haven demand.
  • The decline was amplified by the largest ETF outflows since May and widespread profit-taking following a record rally.
  • A breakthrough in US-China trade negotiations at the ASEAN conference removed immediate geopolitical threats, accelerating the shift away from defensive assets.

Spot gold fell 2% to $4,085.69 per ounce, marking one of the steepest single-day declines in over a decade and pushing prices below the psychologically important $4,100 support level. The selloff represents a dramatic reversal for the precious metal, which had rallied approximately 60% since early September on a potent mix of geopolitical tensions and monetary policy expectations.

The immediate catalyst came from a diplomatic breakthrough in Malaysia, where US and Chinese negotiators reached an agreement that eliminated the threat of immediate 100% tariffs and delayed China's planned rare earth export restrictions by one year. According to people familiar with the discussions, the ASEAN-mediated talks produced more substantive progress than markets had anticipated, significantly reducing the global risk premium that had supported gold's ascent.

"We're seeing a classic case of 'sell the news' after an extraordinary run," said one trader at a major bullion bank, who requested anonymity because they weren't authorized to speak publicly. "The trade deal removed the primary catalyst that had driven the fear trade, and with positioning so extended, the unwind was inevitable."

Institutional flows exacerbated the downward momentum, with gold-backed ETFs recording their largest outflows since May. The substantial selling from fund managers triggered algorithmic trading programs, creating a feedback loop that accelerated the decline throughout the trading session. Market technicians noted that the break below $4,100 could open the door to further losses, with some charts suggesting potential support around the $3,950 level.

Despite the sharp correction, the longer-term picture remains nuanced. The Federal Reserve is still widely expected to cut interest rates in the coming months, which typically provides support for non-yielding assets like gold. However, in the near term, the shift in risk sentiment appears to be overwhelming this traditional dynamic.

Attempts to reach spokespeople at several major gold ETFs for comment were unsuccessful during the volatile trading session. A representative for the World Gold Council declined to speculate on short-term price movements but reiterated the organization's view that gold remains a critical component of diversified portfolios.

The selloff has created opportunities for physical buyers, particularly in markets like India where the festival season is approaching. Lower prices could stimulate jewelry demand, though industry sources indicate that many manufacturers had already built inventory ahead of the expected price surge.

Correction: An earlier version of this article misstated the percentage decline from recent peaks. The correct figure is a 60% rally since early September, not a 60% decline.