Spot Gold Plunges 6%, Marking Largest Drop in Over 12 Years; Analysts Warn of Bubble Risk

On October 21st, as reported by the Financial Times, on Tuesday, the price of gold experienced a significant plunge of 6%, marking the largest single-day decline since April 2013. The ongoing historic rally in the price of gold came to a temporary halt as the Indian Diwali festival gold buying season came to an end. After hitting a high of $4,381 per ounce on Monday, the price of gold dropped sharply to $4,082 on Tuesday. The market generally regarded this as a delayed correction. In recent weeks, the historic rally this year has been accelerating, with a 25% increase just in the past two months. Nicky Shiels, the Metal Strategy Director at MKS PAMP SA, stated, "The market is showing signs of a bubble. The main catalyst is the extreme overbought conditions. This rally is reaching its peak. The $1,000 increase in six weeks indicates that the price of gold is overly inflated, and we are currently at an irrational high." Analysts pointed out that the recent rebound of the US dollar and the lack of futures market positioning data due to the US government shutdown jointly contributed to the most severe gold price plunge since 2013.