- Is bullion bubble about to burst after gold prices soared 60% this year?
Gold suffered its biggest fall for 12 years as it retreated from its latest record high.
The price of bullion tumbled more than 6 per cent to $4,085 an ounce on Tuesday having hit an all-time peak of $4,381 on Monday.
It was the largest one-day fall since 2013 – and sparked speculation that a bubble in the gold price is set to burst.
The precious metal is still up nearly 60 per cent this year, however, having soared on the back of geopolitical and economic uncertainty and buying by central banks as well as regular punters.
Chris Beauchamp, chief market analyst at investing and trading platform IG, said ‘the mania appears to have popped for the time being’.
He added: ‘At least a short-term top is now in place in gold and silver, perhaps offering the chance of a real “buy the dip” moment in precious metals.’
The fall in the gold price has fuelled fears that a bubble may be about to burst
Tai Wong, an independent metals trader, said ‘the sharp jump in volatility… may encourage at least short-term profit-taking’.
He also noted that ‘silver is stumbling badly’ with the price down more than 6 per cent to below $50 an ounce following its record highs.
The sell-off came on signs trade tensions between the US and China – the world’s two largest economies – are cooling.
US President Donald Trump is due to meet China’s Xi Jinping for talks next week.
Traders are now awaiting US inflation figures – due on Friday having been delayed by the government shutdown – as they look for clues on the outlook for interest rates.
Gold and silver tend to benefit from lower interest rates.
David Morrison, senior market analyst at Trade Nation, said: ‘It has been a long time coming, but it looks as if gold is finally having a bit of a downside correction following its record-breaking upside run.
‘The big question for investors and traders alike is if this the start of a much-needed correction? Alternatively, is this sell-off the start of something more serious. In other words, could the top be in for gold?
‘It’s very difficult to know, and analyst speculation will centre around the shape and extent of this sell-off, as well as giving some consideration as to how long this rally has been going.’
Ole Hansen, commodities strategist at Saxo Bank, said: ‘In the last couple of trading sessions traders have increasingly been looking over their shoulders, as concerns about a correction and consolidation have arisen. It’s during corrections that a market’s true strength is revealed.’
SAVE MONEY, MAKE MONEY
Sipp cashback
Sipp cashback
£200 when you deposit or transfer £15,000
4.51% cash Isa
4.51% cash Isa
Trading 212: 0.66% fixed 12-month bonus
£20 off motoring
£20 off motoring
This is Money Motoring Club voucher
Free shares bundle
Free shares bundle
Get free UK shares worth up to £200
4.37% Isa with bonus
4.37% Isa with bonus
Now with no penalty for withdrawals
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence. Terms and conditions apply on all offers.
