Spot gold plunged 6% to its biggest drop in more than 12 years, as analysts warned of bubble risks

Gold prices tumbled 6 per cent on Tuesday, the biggest one-day drop since April 2013, according to the Financial Times, as the historic rally came to a halt at the end of the Diwali buying season in India. After hitting a high of $4,381 a troy ounce on Monday, gold prices plunged to $4,082 on Tuesday in what was widely seen as a belated correction. The historic rally so far this year has accelerated in recent weeks, with gains of 25 per cent in the past two months alone. Nicky Shiels, head of metals strategy at MKS PAMP SA, said: "The market is showing signs of a bubble and the main catalyst is extreme overbuying - this rally is peaking. The fact that gold has jumped $1,000 in six weeks shows that gold prices are overvalued and we are at irrational highs." Analysts pointed out that the recent rebound in the US dollar and the lack of data on futures market holdings due to the US government shutdown have contributed to the sharpest gold price slump since 2013.