Gold (XAU/USD) Price Down 5.7%, Biggest Daily Drop Since 2020. What Next for Gold Prices?

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Gold prices saw a sharp decline on Tuesday, on track for their steepest daily drop in five years, as investors sold the precious metal.

A stronger US dollar and the decision by traders to take profits caused the price to fall significantly. This was compounded by US President Trump who softened his stance regarding a deal with China, reassuring the public that everything would "be fine" and that the US wanted to "help China, not hurt it." This slight shift in tone offered some relief to nervous markets and weighed on safe haven appeal.

Prices scaled an all-time peak of $4,381.21 on Monday with dips being bought aggressively over the past week. We have seen some volatile pullbacks in that timeframe whenever a fresh high has been printed which could have been a sign of some nerves given the precious metals impressive rally in 2025.

Some of the hesitation and the pullback today may be attributed to profit taking coupled with optimism around a US-China deal. There is also a possibility that market participants may want to unwind some positions ahead of the US inflation data release on Friday.

Analysts at Citi said in a note they expect an end to the ongoing U.S. government shutdown, as well as US-China trade deal announcements, which could further lead to improved sentiment and potentially weigh on Gold prices.

Technical Analysis - Gold (XAU/USD)

From a technical standpoint, Gold did print a double top this morning on the four-hour timeframe with a break below the neckline occurring as well.

Now looking at the potential target prices based on the rules of a double top pattern and the price would be around the $4020/oz mark.

This suggests that Gold's fall may not be over and further downside could materialize in the days ahead.

We could get two scenarios for Gold prices next move. The first one could be a move higher after today's fall which could retest the neckline break around the $4220/oz mark.

Now a rejection at this level could be the start of the next leg to the downside which could see price reach the pattern completion around the $4020 mark.

The second scenario may see Gold bulls fail to push prices higher and thus we could see prices continue to decline immediately toward the $4020/oz target without any pullback.

At this stage both scenarios remain viable and price action on the one-hour and 15-minute charts may be monitored for clues.

Gold (XAU/USD) Daily Chart, October 21, 2025

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Source: TradingView (click to enlarge)

Client Sentiment Data - XAU/USD

Looking at OANDA client sentiment data and market participants are Long on Gold with 76% of traders net-long. I prefer to take a contrarian view toward crowd sentiment and thus the fact that the majority of traders are net-long suggests that Gold prices could continue to slide in the near-term.

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