Gold plunged to its weakest in two years on Monday.
Investors ditched it on fears of central banks – like Cyprus, and maybe other weak eurozone economies – selling some of their reserves.
In addition larger countries in the region could look to cash in on huge rises by gold over the last decade.
From the start of the year, the price is down $300. On Friday a 5.3 percent slide pushed it below $1,500 an ounce. On Monday the sell-off accelerated and at one stage spot gold dropped to $1,321.35 an ounce.
The feeling among gold bugs was that central banks could halt their stimulus measures this year, which would cut gold’s appeal as a hedge against inflation.
“What we now see is panic selling, perhaps triggered by the Fed’s stimulus view. The Fed has given the signal that there’s a possibility to reduce QE (quantitative easing) and that took a lot of trust out of gold,” said Dominic Schnider, analyst at UBS Wealth Management.
“And people recognise that an environment where you have no inflation is a powerful driver to get out of the metal.”
Investors also slashed their exposure to commodities in general for a second day after underwhelming Chinese data signalled a setback for the global economy.
Other precious metals were caught in the downdraft, with silver dropping 10 percent, and industrial metals plummeted.
London copper fell to its lowest level in 18 months at $7,085 a tonne, while aluminium hit a three-and-a-half year low. China is the world’s biggest consumer of copper.
Brent crude oil sank below $101 a barrel to a nine-month low and was threatening to break below $100 for the first time since early July. It was down about 15 percent from this year’s peak of $119.17 reached in early February.
In the grains market, wheat, corn and soybeans were all down, but sugar, coffee and cocoa were seemingly little affected by the market rout on Monday, with prices particularly for sugar and coffee already at low levels due to large surpluses.