The prices of gold and silver continued to fall, and investors took profits, triggering a selling spree

Gold and silver prices continued to fall in the early trading session on Wednesday (October 22nd), extending the rare sharp sell-off seen the previous day. Investors were concerned that the previous strong rally had overvalued the precious metals and rushed to take profits at high prices.

Bloomberg reported that spot gold once dropped by 3% to around $4,000 per ounce (about S $5,191), but then rebounded slightly. The gold price plunged by as much as 6.3% the previous day, marking the biggest single-day drop in over 12 years. Spot silver fell again after dropping 8.7% in the previous day's trading session. Technical indicators show that the previous surge of the two precious metals has entered an overbought zone.

The sharp drop in gold prices halted the months-long upward trend. Over the past nine weeks, gold has been rising continuously. So far this year, it has still increased by about 55% in total, mainly driven by central banks' increased holdings, the influx of buying from exchanges, and geopolitical and trade tensions.

Nicholas Frappell, the global head of institutional markets at ABC Refinery in Sydney, said: "Perhaps everyone thinks that since most people already have decent long positions, now is a good time to take profits."

Citigroup Inc. downgraded its "overweight" rating on gold after the sharp drop in gold prices, expecting the gold price to consolidate around $4,000 per ounce in the coming weeks. Citigroup strategists said that although the long-term factors of central banks diversifying their reserves and reducing their reliance on the US dollar still exist, in the short term, gold prices "have already reflected the story of de-dollarization ahead of time."