The price of gold falls as retail investors invest a record $1 billion in ETFs. Alex Gluyas

 Reporter for Markets Alex Gluya On October 22, 2025, at 4.22 p.m., first released at 10:08 a.m. Save

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 After traders abruptly locked in profits in the belief that bullion's stunning rally had pushed prices too high, a violent price reversal decimated the army of new retail investors who scrambled to get exposure to gold. After gold tumbled more than 6 per cent overnight in the biggest intraday decline since 2013, the selling extended on Wednesday sending the spot price to as low as $US4004.26 an ounce before recovering to $US4138 an ounce. After losing 7.1% on Tuesday, silver traded slightly higher. Investors queued outside an ABC Bullion store in Sydney on Tuesday, who may well have suffered from the Wednesday downturn. Through Getty Images, Bloomberg The brutal sell-off comes just days after flows into ASX-listed gold exchange-traded funds hit a record $997 million for this year, surpassing the previous peak of $981 million set during the pandemic in 2020, according to Global X.

 “Given the parabolic nature of the run-up since September and the knowledge that much of the latest buying spree has been from retail or other private sector investors via ETFs, a dash for the profits window was inevitable,” said National Australia Bank’s head of FX strategy Ray Attrill.

 Miners plunged on the ASX as a result of the drop in gold and silver from record highs. Evolution Mining lost 10.3%, Ramelius Resources lost 10.2%, Newmont lost 9.6%, and Northern Star lost 8.8%. Advertisement

 Gold stocks have long lagged the spot price because of rising production costs and operational failures, but that all changed this year as investors piled into the sector. In 2025, VanEck's Gold Miners ETF has doubled in size while yellow metal prices are up 57%. Strategists have brushed off the wild price swings, saying gold miners will continue to generate enormous profits given it costs them an average of $US1500 an ounce to produce the yellow metal.

 “They have spent years tightening bottom lines, creating efficiencies in their production process and making cost cuts, so they were ready for this bull market,” said VanEck’s deputy head of investments Jamie Hannah.

 "They're making good money with prices above $US1500 and even $US3000, and this latest rally has just been the cream on top," says the author. Until now, investors had been betting on higher prices amid the prospect of more interest rate cuts from the US Federal Reserve, which typically boosts the appeal of gold and silver.

 The so-called debasement trade, in which investors shift their risk away from government debt and fiat currencies like the US dollar to protect themselves from growing deficits, has also helped metal prices. The booming demand had put Australian gold ETFs on track for a second consecutive month of record inflows. Meanwhile, the line of people waiting to buy physical gold and silver in Sydney’s Martin Place has grown longer by the day as prices forged fresh peaks.

 “Retail investors adopted a ‘better late than left behind’ mindset,” said Global X investment strategist Justin Lin. “A sizable portion of the surge likely stems from FOMO as gold and silver have outshone every other asset class this year,” although "some of the surge reflects genuine hedging demand." Indeed, gold’s stunning run this year has far outpaced bitcoin’s 17 per cent gain and any of the major global stock indices – Hong Kong’s Hang Seng Index is up 30 per cent and Japan’s Nikkei 24 per cent.

 Fund managers and strategists have been anticipating a pullback because of signs of easing trade tensions between the United States and China, a stronger US dollar, and solid regional bank earnings that allayed concerns about bad US loans. The ongoing US government shutdown, which is on the cusp of becoming the second-longest on record, has also meant that commodity traders have been operating without a key weekly report from the Commodity Futures Trading Commission, which shows speculative positions by investors.

 “We assume such positioning had built to substantial levels and ultimately triggered the sell-off,” said ANZ senior commodity strategist Daniel Hynes.

 Adding to the chaos, the shutdown of India – the second-biggest gold buyer – for the Diwali festival this week has also reduced liquidity in markets.

 Even though the dramatic sell-off in gold was the biggest in 12 years, it still isn't as big as the record-breaking 13% drop in January 1980, when the US Federal Reserve dramatically increased interest rates to combat inflation. Retail investors are now weighing whether the sell-off is the start of a larger downturn or just a healthy pullback before the rally resumes.

 "Given the substantial correction, it raises the question of whether we will see support around the $US4000 to $US4100 level or whether we just witnessed a bubble popping," said Cameron Gleeson, senior investment strategist at Betashares.

 “Given the state of play in the US and geopolitical risks more broadly, the longer-term case for gold remains strong.”

 Still, Citi analysts cut their “overweight” gold recommendation on Wednesday and now expect the precious metal to trade around $US4000 an ounce over the coming weeks as the US shutdown ends, and Beijing and Washington look to reach a trade deal.

 Just last week, firms including Bank of America and Global X were tipping gold to hit $US5000 an ounce.