The gold market has been in a roller coaster ride throughout 2025. After soaring to a record high of $3,500 per ounce, gold prices plummeted to $3,211 in a span of a few weeks. This drastic fall created a frantic buzz among investors. Here, we dissect the five main causes behind the fall.
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Strengthening of the US Dollar: The inverse relationship between the US dollar and gold prices fueled the decline. An uptrend in the dollar paves the way for a drop in gold prices as it makes gold expensive for holders of other currencies.
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Easing Geopolitical Tensions: Gold is regarded as a safe haven during times of political unrest. As geopolitical tensions waned, so did the demand for gold.
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Rise in global interest rates: The surge in interest rates led to a sell-off in gold, as it does not pay interest.
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Improved Economic Outlook: As global economies show signs of recovery, investors are pivoting towards riskier assets, shifting away from gold.
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Large-scale Gold ETF sell-offs: Large scale sell-offs by gold-backed ETFs contributed to the plunge.
As for the movement of gold prices, only time will reveal whether it falls further below $3,200. However, with fluctuations remaining an intrinsically ingrained aspect, gold continues to be a vital asset class for portfolio diversification. Read More
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