The precious metal suffered its biggest three-day loss in nearly three decades on Monday.
In the last three trading sessions alone, gold has fallen by nearly 10 percent, after hitting a two-and-a half-year high.
The fall is part of a wider sell-off of commodities with a slump also in base metals such as copper. Silver has also been hammered and experienced for its worst three-day fall on record – down 25 percent.
This comes as European policymakers began working on new ways to stop fallout from Greece’s near-bankruptcy from inflicting more damage on the world economy after stinging criticism for failing to stem the debt crisis.
The lack of consensus on a lasting solution to the euro zone debt crisis has been a major driver in this year’s rise in the gold price to record highs above $1,900 an ounce.
“The rise in volatility taking place in the gold price was clearly an indication that gold was no longer a low-risk asset. So there are a few signs there that would have given you pause for thought, but inevitably when the move happens, everyone is taken a little bit by surprise,” said Natixis commodities strategist Nic Brown.
“I would suggest that part of what is happening is a collective move away from commodities by investors. The fact that there is carnage going on across the commodities spectrum indicates there are a fair few investors who are getting cold feet at this stage and that has hit some precious metals disproportionately,” he said.