With the easing of trade tensions, gold prices have once again adjusted, and the gold ETF saw its largest single-day reduction in six months on Monday

On Tuesday, gold prices fell below $3,960 per ounce during trading, continuing the decline from the previous trading day, with gold prices dropping 3.2% on Monday. The easing of trade tensions has weakened market demand for safe-haven assets.

Gold reached a historic high of $4,380 per ounce last Monday before sharply retreating, but it is still up about 50% year-to-date. Factors driving the surge in gold prices include continued purchases of gold by global central banks and the so-called "currency devaluation trade," where investors avoid sovereign bonds and fiat currencies in response to expanding fiscal deficits. These factors have attracted both institutional and retail funds into gold ETFs.

However, with the sharp drop in gold prices, gold ETFs reduced their holdings by 448,706 ounces (approximately $1.79 billion) on Monday, marking the largest single-day reduction in six months.

Chris Weston, head of research at Pepperstone Group, noted in a report:

"Gold continues to make lower lows, and the futures trading volume on down days remains high, making it difficult to determine when a bottom will be reached. In the short term, a wiser strategy is to let others catch the falling knife and then look for buying opportunities during the rebound."

The extreme volatility of gold has become a hot topic at the London Bullion Market Association (LBMA) precious metals conference held this week in Kyoto, Japan. According to media reports, the overall sentiment remains bullish, with a survey of 106 attendees indicating they expect gold prices to approach $5,000 per ounce in a year.

However, John Reade, market strategist at the World Gold Council (WGC), stated that central bank demand for gold is not as strong as before, and a deeper correction may actually be welcomed by professional traders.

This pullback may also create opportunities for central banks to increase their gold holdings. According to an official at the LBMA meeting in Japan, the Bank of Korea is considering repurchasing gold in the medium to long term, with its last purchase occurring over a decade ago.

Analysts at Bank of America, including Michael Widmer, pointed out on Tuesday that the recent rise in gold prices is not unusual compared to previous bull markets since 1970, and they expect gold to potentially retreat to $3,800 per ounce this quarter.

Despite gold being previously overbought, it is still underweighted from an asset allocation perspective: gold accounts for only about 5% of global stock and bond investments. Analysts noted that although there are calls to shift the traditional "60/40 stock/bond portfolio" to "60/20/20" (stocks/bonds/gold), investors have generally not acted on this.

In the U.S., the market widely expects the Federal Reserve to cut interest rates by another 25 basis points during its two-day meeting this week. Rate cuts typically support non-yielding assets like gold. Additionally, the market is watching the list of candidates to succeed Fed Chair Jerome Powell, with five contenders currently in the running, as Powell is expected to step down in May next year.

On Tuesday, October 28, at the New York close, spot gold fell 0.69% to $3,954.94 per ounce, and by 17:08 Beijing time, it dropped to $3,886.62, showing a V-shaped trend during the day. COMEX gold futures fell 1.25% to $3,969.40 per ounce Spot silver rose 0.50% to $47.0867 per ounce, after falling to $45.5568 at 17:09, showing a V-shaped reversal during the day. COMEX silver futures rose 0.81% to $47.155 per ounce