Why are gold prices falling?

2025-10-24

BeiChen Lin, CFA, CPA

BeiChen Lin, CFA, CPA

Senior Investment Strategist, Head of Canadian Strategy




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Key takeaways

  • Gold could remain volatile 
  • More rate cuts expected in Canada, UK
  • U.S. economy still looks resilient

Gold declines amid stretched valuations

Gold has been top of mind for many investors this week, with prices falling significantly at the start of the week. Despite a strong run in 2025, traditional valuation models suggest gold prices may have become somewhat stretched, creating some fragility in the asset class.

Looking ahead to 2026, we think gold will remain somewhat volatile. This is because gold prices can be influenced by a range of factors, including geopolitics, perceptions of economic growth and other macroeconomic drivers. From a portfolio perspective, we think having a modest exposure to gold can be a useful diversifier, though it’s important to size positions carefully to manage risk during volatile periods.

Inflation update: Mixed signals from UK, Canada

This week brought inflation reports from both Canada and the United Kingdom, highlighting differing economic trends.

  • Canada: Headline inflation came in at 2.4% year-over-year, slightly hotter than expected, with core inflation also edging up. Despite this, fragility in the labor market suggests the Bank of Canada is likely to cut interest rates at its meeting next week.

  • United Kingdom: The latest inflation numbers were slightly below consensus expectations, which is encouraging. However, overall inflation remains elevated and above the Bank of England’s (BoE) target rate. As inflation eventually moderates further into 2026, we expect the BoE to continue gradually lowering rates toward more neutral levels over the coming months.

U.S. economy holds strong, China’s growth eases

The latest indicators point to a resilient U.S. economy and a slight growth slowdown in China.

  • United States:
    Amid the ongoing government shutdown, private-sector data continues to provide insight into the U.S. economy. This includes PMI (purchasing managers’ index) readings, which offer a snapshot of current growth. In addition, the Atlanta Fed’s GDPNow model estimates third-quarter GDP (gross domestic product) growth could reach 4%. That figure would roughly match the growth rate from the second quarter and is nearly double the long-term trend.

    U.S. consumer spending also remains robust, with private-sector data suggesting retail sales increasing around 6% year-over-year. Given this overall resilience, we expect the Federal Reserve to deliver a modest 0.25% rate cut next week, rather than a larger 0.50% reduction.  

  • China:
    Third-quarter GDP growth, reported by China’s National Bureau of Statistics, slowed slightly compared to the first half of 2025, coming in at 4.8%—but still a touch above consensus expectations. We believe the Chinese government remains committed to a 5% growth target and may implement additional stimulus measures to support the economy.

Overall, the global economic backdrop still looks resilient, despite pockets of pressure in certain regions and asset classes. We think investors can benefit from staying disciplined, maintaining diversified portfolios and focusing on their long-term objectives.

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