The biggest drop in the past two years! What happened to the price of gold?

Gold made a rare plunge as tensions in the Middle East eased and safe-haven demand waned, posting its biggest intraday decline in nearly two years.

Spot gold fell 2.8% to a low of $2,324.96 an ounce on Monday, down nearly $70 an ounce on the day, falling to a record closing high set on Friday and its biggest intraday drop since June 2022.

COMEX June gold futures closed down 2.79% at $2,346.4 an ounce, refreshing the lowest closing level since April 5 and the biggest daily decline in the main contract since February 3, 2023.

Tensions have cooled into the week after the conflict between Israel and Iran sparked fears of a full-scale war in the Middle East.

Speaking in Tehran on Monday, Iranian Foreign Ministry spokesman Nasser Kanaani said that Israel's attack was insignificant and of no military value, and that Israel had received the necessary response at this stage, according to media reports.

Nicholas Frappell, global head of institutional markets at ABC Refinery in Sydney, was quoted by the media as saying that the Iranian government's reaction to Israel was light and hinted that there would be no retaliation, a fact that had brought down the risk premium in the gold market.

Bank of America also said in a note on Monday that the direct impact of tensions between the Middle East on U.S. equities and other asset classes may not be as direct as it has been in the past two weeks.

Profit-taking by investors after the recent historic surge also weighed on gold prices. Gold prices have risen by more than 50% since February 2020 and by almost 20% in the last two months alone.

At present, institutions are still optimistic about the future of gold, and investment banks, including Goldman Sachs, have been raising the target price of gold.

UBS believes that a healthy pullback in gold prices indicates that the market can form a support base at a higher level. This will help boost investor confidence in gold's long-term bull market.