Traders said the selling was prompted in part by comments from Fed Chairman Ben Bernanke about the slowing economy.
“Gold has been selling off because of all the anti-inflationary headlines,” says George Gero, RBC Capital Markets Precious Metals Strategist. Historically, gold has been used as a hedge against inflation.
"Fed warning on the economy, weak employment data, weak manufacturing data are all anti-inflationary,” added Gero.
“Everything going on right now is Europe—fear that it will dampen growth,” says Kevin Grady, a trader with Phoenix Futures & Options. The fear of a global slowdown and concerns about stability in the euro zone are causing investors to rush into the relative safety of the U.S. dollar. The run-up in the greenback has been putting pressure on dollar based assets including gold, silver and also, oil.