Data: FactSet; Chart: Axios Visuals

Gold fell by 2% on Tuesday with some ETFs seeing prices decline by 5% or more as investors took profits on the precious metal after a rally that has pushed gold to record highs near $2,100 per troy ounce.

Why it matters: It was the third straight session that gold fell, the longest losing streak since June, after seven days of appreciation, and the worst selloff since 2013.

What they're saying: “The scale of the upswing over the past four weeks has been excessive. ... Sentiment towards gold became positive in the extreme, with only a minority of participants sounding a note of caution,” Commerzbank analyst Carsten Fritsch wrote in a note to clients.

  • “The price rise was almost solely attributable to robust investor demand, with all other demand components playing hardly any role."

Be smart: U.S. Treasury yields also spiked on Tuesday, with yields on the benchmark 10-year note up by the most since June, reducing the attractiveness of gold, which does not pay a dividend or interest.

  • The unexpected rise in PPI also hurt gold prices, as it could imply higher U.S. interest rates in the future, analysts said.

Of note: Silver retreated by nearly 5% with silver-backed ETFs down more than 10%.

The big picture: “The long-term outlook for gold and silver remains positive, however," Commerzbank's Fritsch said. "Prices are likely to begin rising again as soon as the current correction has finished.”

  • In fact, analysts expect the declines to attract more buyers looking to buy the dip, as happened in March when gold swooned with the stock market, dropping 28%, only to gain 149% between March 18 and Monday.

Yes, but: "The risk to this view is that we could now be entering a period of wider swings in the gold price, akin to 2011-12, which would be suggestive of a more mature phase in the bull cycle and consistent with the 'accelerated aging' hypothesis," Marc Chandler, chief market strategist at Bannockburn Global Forex, said in a note.

  • The rally also will be dependent on the Fed remaining aggressive in keeping rates down, the dollar continuing to fall and inflation expectations recovering, he added.

Go deeper

Ben Geman, author of Generate
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