"Gold's recent dramatic selloff resulted from a convergence of factors following a surge in prices above $5,500 per ounce. The immediate catalyst was President Trump's nomination of Kevin Warsh as the next Federal Reserve chair, who is viewed as hawkish on monetary policy. This sent the dollar higher and undercut investors who had bet on currency weakness, while expectations of tighter policy raised the opportunity cost of holding non-yielding gold."
"The selloff intensified amid extremely crowded positioning following gold's 66% surge in 2025. Heavily leveraged investors faced rising margin requirements, followed by margin calls that triggered liquidations, creating a self-reinforcing downward spiral. A record wave of call option purchases had mechanically pushed prices higher, setting up conditions for a sharp reversal once momentum shifted and liquidity deteriorated."
"Gold remains a compelling investment despite the recent substantial price declines because its fundamental value drivers remain intact. Central banks worldwide continue adding gold to their reserves as a hedge against currency instability and geopolitical uncertainty. Unlike paper assets, gold carries no counterparty risk and has preserved purchasing power across centuries of economic upheaval. The recent selloff presents an attractive entry point for long-term investors, as gold typically performs well during periods of monetary expansion, inflationary pressures, and market volatility-all factors that remain relevant in today's economic environment."
A hawkish Fed nomination and the resulting stronger dollar increased the opportunity cost of holding non-yielding gold after prices surged above $5,500 per ounce. Crowded positioning following a 66% rally in 2025, heavy leverage, rising margin requirements and margin calls produced forced liquidations and a self-reinforcing decline. Massive call-option buying had mechanically pushed prices higher and amplified the reversal when momentum faded and liquidity thinned. Despite the selloff, ongoing central-bank accumulation, gold's lack of counterparty risk, and its historical role as an inflation hedge and portfolio diversifier support long-term investment appeal.
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