Gold prices tumbled for the past days, falling around 10 percent from its peak reached on Tuesday.
Prices of yellow metal fell to below $1,710 in Asia trading, down $200 from the record high of $1,913 hit two days back.
“The drop comes despite fairly upbeat statements over the outlook for demand from commodity industry bellwethers, like BHP Billiton and Glencore. This would imply that the correction is technical-related and spec longs have been forced to cover,” Societe Generale said in a note.
Technically gold could fall lower still and we are keeping a close eye on $1,694 and $1,642 price levels where breaches could trigger additional unwinding of long positions, said the note.
Societe Generale also said a clear trigger for the sharp reversal has been difficult to pinpoint and so it would seem that the exaggerated run-up in gold in the first place was enough to tip the balance, as the pool of buyers simply dried up and sellers came to the fore.
Analysts believe the sharp decline in prices of the precious metal was due to hike in margin requirements for gold futures.
Chicago Mercantile Exchange (CME) hiked the margin for gold positions by 27 percent, the biggest in more than two and half years.
Accordingly, investors now need to put $9,450 as margin amount towards opening a new position in gold futures. Recently, Shanghai Gold Exchange increased the margin requirements by 26 percent.
Traders also remain cautious ahead of Federal Reserve’s Chairman Ben Bernanke speech at Jackson Hole symposium on Friday.