• Gold prices fell sharply, marking their largest one-day drop in five years.
• Spot gold dropped 4.9 percent to USD 4,143 per ounce; December futures fell 4.7 percent to USD 4,155.
• Gold hit an all-time high of USD 4,381.21 on Monday and has risen about 60 percent this year.

Gold prices tumbled sharply on Tuesday, marking their largest one-day drop in five years, as investors took profits following record highs driven by expectations of US interest rate cuts and persistent safe-haven demand.

Spot gold fell 4.9 percent to USD 4,143 per ounce by 11:49 a.m. EDT (1549 GMT), hitting a one-week low and recording its steepest decline since August 2020. December US gold futures dropped 4.7 percent to USD 4,155 per ounce. The metal had reached an all-time peak of USD 4,381.21 on Monday and has surged roughly 60 percent this year amid geopolitical and economic uncertainty, rate-cut speculation, and continued central bank purchases.

"Gold dips were being bought as recently as yesterday, but the sharp jump in volatility at the highs over the past week is flashing caution and may encourage at least short-term profit-taking," said Tai Wong, an independent metals trader.

The dollar index rose 0.4 percent, making bullion more expensive for holders of other currencies. Jim Wyckoff, senior analyst at Kitco Metals, noted, "Better risk appetite in the general marketplace early this week is bearish for the safe-haven metals."

Analysts at Citi added that resolutions to the US government shutdown and potential US-China trade deal announcements could lead to gold consolidating over the next two to three weeks.

Other precious metals also fell sharply. Spot silver dropped 6.8 percent to USD 48.89 per ounce. "Silver is stumbling badly today and has dragged the entire complex lower," Wong said. "It appears we have a short-term top at USD 54 and while sentiment wobbles under USD 50, silver is likely to trade sideways with substantial volatility as long as gold remains relatively firm."

Platinum declined 5.4 percent to USD 1,550.10 per ounce, while palladium slipped 5.1 percent to USD 1,425.19.

Traders are now looking ahead to Friday’s release of the US consumer price index for September, delayed due to the government shutdown. The report is expected to show a 3.1 percent year-on-year rise. Markets are pricing in a 25 basis point interest rate cut by the Federal Reserve at next week’s policy meeting.

Gold, a non-yielding asset, typically benefits in a low interest rate environment, supporting demand despite the recent pullback.