Gold tumbled sharply in a sudden cross-asset selloff, underscoring how even traditional safe havens can buckle under extreme market stress. Bullion dropped as much as 4.1%, while silver plunged 11% and copper slid 2.7% on the London Metal Exchange. The move came as U.S. technology stocks retreated on renewed doubts about whether massive artificial intelligence investments will translate into sustained earnings growth, prompting investors to liquidate commodity positions to cover equity losses.

Liquidity Crunch Overrides Safe-Haven Status

The speed of the selloff reflects a classic liquidity event rather than a structural shift in gold’s underlying fundamentals. In times of acute stress, investors often sell what they can — not necessarily what they want to. As equities fell, particularly high-beta technology names exposed to AI spending cycles, traders unwound profitable positions in metals to raise cash or meet margin calls.

This dynamic explains why gold, typically a refuge during volatility, can temporarily decline alongside risk assets. Systematic and momentum-driven strategies, including commodity trading advisors (CTAs), appeared to amplify the move as technical levels broke. Algorithmic selling created what market participants described as an “air pocket,” intensifying intraday losses before prices partially stabilized.

For Israeli and U.S. portfolio managers alike, the episode serves as a reminder that correlation structures can shift abruptly during deleveraging phases.

Silver and Copper Signal Broader Risk Repricing

Silver’s 11% plunge highlights its dual identity as both a precious and industrial metal. While gold often trades on macro themes such as real yields and geopolitics, silver is more sensitive to growth expectations. Fears that AI-related capital expenditures may not materialize as quickly as anticipated triggered reassessments across cyclical assets, including industrial metals.

Copper’s decline further reflects concerns about global demand momentum. Although the broader narrative around electrification and data-center expansion remains intact, short-term positioning had become extended following a strong rally fueled partly by speculative inflows.

Profit-taking also played a role. Both gold and silver had recently surged on momentum-driven buying tied to geopolitical tensions, debate over Federal Reserve independence, and a broader shift away from traditional fiat assets. When sentiment reversed in equities, those gains became a ready source of liquidity.

Macro Outlook Remains Supportive Despite Volatility

Traders now turn their attention to upcoming U.S. economic data, particularly core consumer price figures, for signals on the Federal Reserve’s policy path. Lower interest rates typically support non-yielding assets such as gold by reducing the opportunity cost of holding bullion. Conversely, firmer inflation could reinforce expectations of prolonged policy restraint, tempering near-term upside.

Despite the abrupt selloff, major banks remain constructive. JPMorgan Private Bank sees gold reaching $6,000 to $6,300 an ounce by year-end, while Deutsche Bank and Goldman Sachs maintain bullish projections. Their thesis rests on persistent geopolitical uncertainty, structural fiscal deficits, and central-bank diversification away from traditional reserve assets.

Looking ahead, the key question is whether this episode marks a broader unwinding of speculative positioning or merely a temporary liquidity-driven correction. If equity volatility stabilizes and rate-cut expectations remain intact, gold may reassert its safe-haven appeal. However, continued cross-asset stress could keep precious metals vulnerable to further short-term swings as investors prioritize cash preservation over thematic allocation.