Why Gold Fell Below $4,000: Trade Peace, Strong Dollar & Rising Risks

The recent gold price slide reflects a convergence of geopolitical and liquidity dynamics shifting in favor of risk-on assets. At its peak in mid‐October 2025, spot gold reached about US$4,381/oz, driven by heightened trade tensions between the U.S. and China and expectations of Federal Reserve rate cuts. Analysts and pricing sources saw broad safe-haven demand underpinned by uncertainty and inflationary pressures.

This uptrend reversed as U.S. and Chinese officials met in Malaysia to lay groundwork for a trade framework, easing some bilateral tensions. Concurrently, investors engaged in profit-taking from elevated levels; spot gold dropped ~5–10% from its peak into the US$3,900–4,100 range. A warming toward a deal reduced urgent demand for gold’s safe‐haven role.

Federal Reserve behavior proved consequential: while rate cuts are anticipated, Fed Chair Jerome Powell’s signaling that further easing is not guaranteed gave markets pause. This, combined with a relatively strong U.S. dollar and falling Treasury yields, has weighed on gold. The correlation between gold and real U.S. yields tightened, weakening gold’s appeal when real yields rose or inflation expectations cooled.

Looking ahead, structural supports for gold remain. Central bank purchases continue, inflation remains a concern (though creeping lower), and the potential for renewed geopolitical shocks persists. However, indicators suggest current gold pricing may be overstretched. Technical analysis places key support levels in the US$3,830–3,970 range, with potential downside toward US$3,200–3,700 if momentum shifts sharply.

For investors, risks include a Fed pivot away from easing, a strong dollar rebound, and diminishing geopolitical risk. Strategic implications suggest readiness to adjust allocations depending on policy signals and risk sentiment.