According to Reuters, the market crash stems from tough statements by US Federal Reserve (FED) officials, weakening expectations of a possible interest rate cut in December.
The expectation of a gradual decline in the possibility of the Fed cutting interest rates in December has caused the gold and silver markets to lose momentum, said David Meger, Director of Metals Trading at High Ridge Futures.
The stock market plummeted after a wave of global sell-offs were triggered by the tightening signal from the FED.
The prolonged US government shutdown, which ended on Thursday, created a huge data void, leaving the Fed and traders in a "dilemma" ahead of next month's policy meeting.
Investors expect the new data to show a slowing economy, creating room for the FED to cut interest rates in December, thereby increasing the attractiveness of gold.
However, these expectations have faded as many Fed officials have become more cautious about easing monetary policy.
According to CME Group's FedWatch tool, the probability of the market predicting the Fed will cut 25 basis points next month has dropped to nearly 46%, from 50% at the beginning of the week.
Gold - non-interest-bearing assets often have positive developments in the context of economic instability and a low interest rate environment.
When a deposit call occurs and a liquidation is required, traders will pay all positions to release the deposit... This is part of the reason why even gold is falling in the current risk-off environment, Fawad Razaqzada, market analyst at City Index and FOREX.com, said in a note.
Meanwhile, physical demand for gold in major Asian markets this week has been quite quiet.
Notable US economic data next week
Monday: Empire State Production Survey.
Wednesday: Minutes of the Federal Open Market Committee (FOMC) meeting.
Thursday: Philly FED Production Survey, Weekly Unemployment claims, existing home sales.
Friday: S&P's preliminary PMI, University of Michigan Consumer Confidence Index (edited version).
Note: The world gold market operates through two main pricing mechanisms. The first is the spot delivery market, where prices are quoted for transactions and spot deliveries. Second is the futures contract market, which sets prices for future deliveries. Due to year-end book-taking activities, December gold contracts are currently the most actively traded on CME.
