The price of gold plummeted late at night. What impact will this have?

Affected by the cooling of market risk aversion sentiment, the gold that had been surging throughout the week ended the day with a sharp decline. On the evening of October 21st local time, there was intense volatility in the international gold market, with the spot gold price dropping by more than 6% and falling below $4,100 per ounce, marking the largest single-day decline since 2013. The COMEX gold futures price also dropped significantly, closing at $4,121.2 per ounce. In the afternoon of the previous day, London gold was trading at around $4,342 per ounce, and within just 7 hours, it dropped by more than $240. This sudden drop led to a decline in the total global gold market value from the high of $30 trillion.

The overnight price drop of gold will have various impacts on multiple fields such as business. Firstly, it will affect the gold industry chain. The price drop of gold poses a direct blow to producers. Due to relatively fixed mining costs, a significant decline in prices may lead to some mines being unable to cover operating costs, forcing enterprises to reduce production or even close mines. For example, when the gold price plummeted in 2013, many enterprises were forced to undergo restructuring and cost reduction. The price drop may stimulate consumers' purchasing desire, but if they expect the price to continue to fall, consumers may postpone their purchase plans. Merchants need to adjust product combinations, offer discounts or promotional activities to attract consumers, in order to cope with market changes. In the core areas of the gold industry chain such as Huidai, the price drop of gold has triggered a dramatic change in the industry. Formal merchants have reduced inventory, small players have fallen into high leverage traps, and industry credit has collapsed. Regulation needs to cut off the private trading chain without physical goods and high leverage, and rebuild a market order based on real supply and demand.

Secondly, it will affect consumers. The price drop of gold makes consumers feel that they can obtain gold at a lower cost. For consumers who pursue cost-effectiveness, this is an irresistible temptation. However, if the expected price continues to fall, consumers may choose to wait. And some investors who purchased at high prices may face book losses. The price drop of gold will lead to a reduction in asset value, and they may choose to hold on or add to their positions to spread costs. For investors who regard gold as a hedging tool, the price drop may prompt them to reevaluate their investment portfolio and consider reducing gold holdings to avoid risks. At the same time, it also provides an opportunity for investors who are waiting to enter the market to buy at a low price. Although short-term price fluctuations of gold may cause market volatility, in the long term, the potential economic and geopolitical uncertainties factors that drive up the price of gold still exist. This will affect merchants' judgment of the future market and their strategy formulation.

Thirdly, it will have an impact on international trade and financial markets. Gold and the US dollar have an inverse relationship. The price drop of gold may indicate that the US dollar is relatively strong, affecting the monetary policy decisions of central banks of various countries, especially the adjustment of foreign exchange reserve structure. The appreciation of the US dollar will make the prices of US export goods relatively higher, reducing its competitiveness in the international market. At the same time, the price drop of gold may trigger adjustments in investors' trading strategies, leading to an increase in market volatility. This increases investors' risks and provides more trading opportunities. The stock prices of gold mining companies are usually closely related to the price of gold. When the price drops, the profit expectations of mining companies decline, and their stock prices fall accordingly. In addition, the holdings of gold ETFs may also decrease as a result, further affecting market liquidity.

Fourthly, it will have an impact on the commercial market. For investors who regard gold as a hedging tool, the price drop may prompt them to reevaluate their investment portfolio and consider reducing gold holdings to avoid risks. At the same time, it also provides an opportunity for investors who are waiting to enter the market to buy at a low price. Although the short-term price drop of gold may trigger market volatility, in the long term, the potential economic and geopolitical uncertainties factors that drive up the price of gold still exist. This will affect merchants' judgment of the future market and their strategy formulation.

The overnight price drop of gold is like a stone, causing ripples in various fields of business. Although short-term fluctuations pose challenges, the factors driving the gold price in the long term still exist. Merchants and investors need to seize opportunities and manage risks in the face of dynamic changes.