MW One theory on why gold suffered its biggest one-day fall in more than ten years

By Jules Rimmer

Gold's 5.74% plunge Tuesday was the biggest since 2013.

Singapore's President Tharman Shanmugaratnam (L) and IMF Managing Director Kristalina Georgieva chat at the end of a panel on the global economy during the IMF/World Bank annual meetings at the IMF headquarters in Washington, DC, on October 16, 2025.

It was coming. It took gold (GC00) barely two months to jump from $3,000 per ounce to $4,000/ oz and, after a 60% rally for the year, sooner or later a correction was inevitable. Gold's 5.7% descent on Tuesday was its largest percentage decline since June 20, 2013 but, if one economist is to be believed, it was all because of the International Monetary Fund gathering last week.

Robin Brooks, senior fellow at the Brookings Institution, sought to explain the flows driving the price of gold in a column on Substack. He concluded that last week's annual meeting of the World Bank and the IMF in Washington D.C. probably persuaded many of the delegates present to upgrade their view of America's growth cycle, removing one of the main pillars in the recent investment case for gold in the process.

Brooks considered the factors most commonly cited to justify the appreciation of gold and decided that geopolitical uncertainty, the global debt overhang and concomitant fears of fiat currency debasement, and central bank diversification were "mostly old news and not a driver of what's going on now".

Brooks is of the opinion that it was the state of the U.S. economy, whether it was heading for recession or not, and how this would impact the Fed's monetary policy that was the chief locomotive for the gold price of late.

Last week's shindig in D.C. then, Brooks argues, would have been central in persuading attendees that "life goes on, regardless of who's in the White House" and to upgrade their U.S. growth view, while simultaneously paring back their Fed cut forecasts. "That's a cyclical upgrade that can put a stop to the massive rise in gold prices, at least for a little while", he writes.

Not everyone would agree with Brooks. In a posting on X, Stratcom Capital's Carsten Stork described the plunge as "pure market mechanics after euphoria," with over-extended positions unwound and algorithms triggering profit-taking.

Other market commentators note a stronger dollar DXY while in a note Tuesday MRB Partners' Peter Perkins arguing that gold was due a pullback because it was at record highs in inflation-adjusted and nominal terms, and it's now expensive in relative terms compared with stocks, money supply and GDP.

-Jules Rimmer

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October 22, 2025 06:23 ET (10:23 GMT)

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