Gold fell to its lowest in almost three years on Wednesday, putting it on course for a record quarterly loss, as US economic data increased fears the Federal Reserve will soon end ultra-loose monetary policy.
Prices could slide further - some investors saying below $1,000 per ounce - while there is little potential for data, market trends or economic developments in the United States or Europe to reverse an accelerating investor move out of gold.
Spot gold tumbled to its lowest since August 2010 at $1,223.54 an ounce and was down 3.8 percent at $1,227.86 an ounce at 12.32pm UAE time. US gold futures for August delivery were down $47.60 at $1,227.90, having hit a low of $1,223.20.
Strong gains in US orders for durable goods, the largest annual rise in house prices in seven years and rising consumer confidence fuelled speculation the Fed would rein in its $85bn monthly bond-buying programme, which had helped push gold prices to record highs in recent years.
"We bought gold for two reasons - because we were worried about the inflationary impact of policy and because we thought the financial system was going to fall apart," Sean Corrigan, chief investment strategist at Diapason Commodities Management, said.
"Although it may be completely the wrong judgement, the market has decided that none of those at the moment is a concern."
Spot prices have fallen by more than a quarter this year and by 22.8 percent this quarter, their biggest quarterly loss since Reuters data began in 1968.
"Gold has generally always outperformed at least other commodities when we've had financial stress, when volatilities have picked up, when credit spreads have widened - and it's clearly not doing that now," Diapason's Corrigan said.
European share markets were up Wednesday. Gains in global stock markets this year will be a signpost of more losses in gold, analysts say.
The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Shares, reported the biggest one-day drop in its holdings in more than two months at 16.23 tonnes on Tuesday. That brought the fund's total outflow for the year to 381 tonnes.
"There has been 550 tonnes of gold sold out of ETFs since mid-February," Natixis analyst Bernard Dahdah said. "That's the equivalent of saying we've added to the gold market an additional 11 percent on top of 2012's gold (mine) output."
Demand in number one consumer India is likely to fall this quarter as the government moves to curb gold imports to reduce a record current account deficit.
In the latest move, India's central bank told rural regional banks on Tuesday they could no longer provide loans against gold jewellery and coins.
Worries about a liquidity crunch in China, the world's second-largest gold consumer, drove down share prices despite attempts by the Chinese central bank to soothe markets. Physical gold demand could be hurt by a slowdown in Chinese growth, analysts said.
Silver prices underperformed gold, falling more than 5 percent to its lowest since August 2010 at $18.39 an ounce. Spot prices were later down 5.1 percent at $18.56 an ounce.
Spot platinum was down 2.2 percent at 1,320.49 an ounce, while spot palladium was down 3.6 percent at $639.22 an ounce.
The platinum group metals were underpinned by threats to output from major producer South Africa. The National Union of Mineworkers has submitted wage demands to Impala Platinum's refinery operations in line with the 15 to 60 percent pay hikes it is seeking from gold producers, a source said on Wednesday.