NEW YORK (AP) – Gold plummeted to its lowest level in more than two years as traders rushed to sell their holdings following a big price drop on Friday.
The precious metal has plunged almost $200 over the past two days and is trading below $1,400 an ounce for the first time since February 2011.
The sell-off started Friday when the U.S. government reported that wholesale prices fell in March by the most in 10 months. Investors had been buying gold in anticipation of a pickup in inflation. With prices now falling, the attraction of the metal as an alternative investment has waned.
The gold market was also rattled by a proposal last week that Cyprus sell some of its gold reserves to support its banks. Traders worry that Spain, Italy and other weak European countries might follow suit, flooding the market with excess supply just as demand for the metal is weakening.
“This is panic, this isn’t organized at all,” said Phil Streible, a senior commodities broker at RJ O’Brien Futures. “If you look at Italy or Spain … if they start liquidating, that’s when you get serious movements.”
The price of the metal has dropped almost 12 percent in the last two days. Gold peaked at $1,900 an ounce in September 2011 during the market turmoil that followed a downgrade to the U.S. government’s credit rating.
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