Picture source: Bloomberg
What Was 'Black Monday'?
19th October 1987 is referred to as 'Black Monday', when the Dow Jones Industrial Average stock market sank by 22.6% in a single day. The crash had worldwide repercussions, and markets across the globe lost trillions in value. It's one of the worst single-day market crashes in history. Everyone anticipated another Great Depression, and it took several months for markets to recover. The ripple effect of 19th October 1987 was experienced by nearly every major economy.
Why Are People Talking About 'Black Monday' Again?
On Friday, 4th April 2025, the US stock market had its worst day since the Covid-19 crash. More than $5 trillion was erased in a matter of hours as stocks plummeted, and volatility soared. Thanks to sweeping tariffs introduced by US President Donald Trump on nearly 180 countries worldwide, global markets are jittery and triggering the fear of global trade war. On Monday, 7th April 2025, European and Asian markets took a major hit. Affected countries started to react while businesses are under pressure and investors are worried of recession.
How Does This Affect The Gold Price?
Stocks were not the only market that went berserk on 'Black Monday' 30 years ago; so did gold and other commodities. Whilst the precious metal is a safe haven, but sometimes it also acts as an ATM machine as investors make withdrawals to raise money. After initially soaring on Black Monday, gold then fell for the rest of the day and the next as investors sold whatever assets they could to generate cash.
The same happened on Monday, 7th April 2025 as the gold tumbled over and this might be due to investors liquidating bullion to raise cash or cover margin calls in other asset classes suffering steep losses.
Another possible reason for the bearish pattern was probably due to profit-taking by investors as gold reaches its new all time high again on Friday, 4th April 2025. The counter tariffs from China causes the world to get into 'panic liquidation' of any possible asset, including gold as world economists warned the trade war could cause global recession.
Conclusion
Experts have warned of a potential "Black Monday 2.0" following a significant market drop on 4th April, the largest since the COVID-19 crash. As a gold enthusiast, now is a great time to keep on stacking gold if you have extra cash, helping to average down your purchase price from earlier in 2025 when gold peaked. If you're using dollar-cost averaging (DCA) method, you may continue with that strategy. In times of uncertainty, avoid selling your gold in fear of further price drops, as it could lead to greater losses. Holding onto your gold asset ensures you won’t lock in a loss.