Gold Prices Slide After Skyrocketing to Historic Levels – Is This the Perfect Time to Buy In?

Gold value plummeted over 5% on Tuesday, marking the largest price decline of the precious metal since June 2013.

The sudden decrease in the price of gold, often viewed as one of the most stable investments during uncertain times, took place after investors retrieved their profits from a historic price increase, and as Chinese and US officials are expected to have another meeting for a new round of trade talks.

Spot gold dropped to as much as 6.3% to $4,082.03 a troy ounce on Tuesday, after reaching a jaw-dropping historic high of $4,381.21 on Monday.

Meanwhile, the US gold futures settled at 5.7% lower at $4,087.70, recording the largest percentage decline since April 2013.

What Causes the Sudden Gold Price Drop?

Industry analysts claimed that the price decline happened after weeks of heavy buying, which forced gold values to overheated levels.

Speaking with Bloomberg, TD Securities global head of commodity strategy Bart Malek said that precious metal dealers are 'taking profits after a very robust rally.'

For some analysts, the price drop was overdue.

'It kind of feels like gold just hit an unexpected pothole on an otherwise open highway,' Adam Koos, president and senior financial adviser at Libertas Wealth Management Group, explained to MarketWatch. 'It's been cruising along for a while, magnificently, and every now and then, the market just slams the brakes to make sure the passengers are still awake.'

Gold prices rallied 25% in the past two months. Some factors contributing to this phenomenon are the strong demand for gold amid the increasing US government debt, uncertainty in the political scene, and the fear of further interest rate cuts by the Federal Reserve.

But the lifting of trade tensions between the US and China and the favourable US dollar rebound encouraged investors to lock in profits.

The trade representatives from both countries are expected to meet this week before the planned meeting between US President Donald Trump and Chinese head of state Xi Jinping next week.

'I expect we'll probably work out a very fair deal with President Xi of China,' Trump said on Monday as reported by CNN. 'I think we're going to work out something that's good.'

Also, some analysts believe that the end of India's Diwali festival contributed to the sudden gold price drop. India is the second-largest gold consumer in the world.

Gold Prices Remain Unstable

Wednesday's gold prices remain unstable after the hard-hitting pullback in more than five years.

Market analyst Tony Sycamore from IG said that the possible cause of the decline was natural. 'Gold was massively stretched, massively overbought. There's been a lot of FOMO (fear of missing out) going into that market,' Sycamore said, according to Reuters.

He also mentioned that the same decline is being experienced by tech stocks and other markets. 'For some of these other frothy markets, we're seeing little flash crashes now ... We're just seeing little tremors in markets, and potentially there's something more significant to come.'

Is It Time to Buy Gold?

The significant price decrease of gold may encourage or discourage buyers from thinking about precious metals as investments.

Analysts weighed down on the current market trend. In a report from Forbes, industry experts believe that the brief downturn could be a great buying opportunity to buy gold.