The recent slide in gold prices has confounded traders and investors. Normally safe-haven investments tend to rise as money moves out of riskier propositions like stocks.
But since the selloff in global stock markets began last week, spot gold has fallen more than 6%. So, why is gold retreating?
"We have seen sharp losses in other investment areas and investors are taking profitable trades off the table and using the payments from gold to meet some margin requirements and also to book some profits to offset some larger losses elsewhere", Larry Fernando, head of the precious metals desk at Mint Equities told "Squawk Box Europe" on Tuesday.
"In fact, gold is working as an insurance policy," Fernando said. "With gold there is money on the table for investors to go away and pay the margin calls to book profits to offset the losses."
But gold prices will start climbing again once the "equity markets have settled down," he said.
"Gold price has the potential of $720 (per ounce)," Fernando added.
On Tuesday spot gold gained 1.24% to $644.50 per ounce.