Gold was on the brink of five-year lows on Tuesday, with more losses expected in the coming months following Monday's "bear raid" when sellers dumped an estimated 33 tons in just two minutes.
The sudden bout of selling in Shanghai and New York occurred during illiquid trading hours, with a wave of orders placed during a one-minute period shortly after the Shanghai Gold Exchange opened on Monday.
Within a further minute, the deals had been completed, sending the most-active U.S. gold futures contract down $48 to as low as $1,080.00 per ounce, its weakest since February 2010. Gold worth $1.3 billion changed hands on the Chinese and U.S. markets on Monday, and the lack of liquidity on a day when Japanese markets were closed for a holiday hastened the slide.
Spot gold stood at $1,100.26 per ounce on Tuesday, with another 29 tons worth about $1.02 billion changing hands on the Shanghai exchange during the day. That was almost double the exchange's 16 ton average daily volume last month.
U.S. gold futures for August delivery settled down $3.30 at $1,103.50.
Monday's move has left the market vulnerable to further slippage - possibly paving the way toward $1,000 per ounce.
Many investors analyse charts of previous market moves to decide their strategy, with prices hitting resistance at certain levels as they rise, or finding support as they fall.
In this case, traders and analysts are speculating that at least one major fund took advantage of the thin market to push the gold price through a support level on the charts, possibly because they had already sold gold short. Chinese entities were seen as the most likely sellers on Monday.
Ashok Shah, investment director at London & Capital investment fund, said upwards blips were possible but doubted they would last.
"You are going to get some bear market rallies but structurally the market has been broken and over the six-month period you'll get the bear trend continuing," he said.
After sliding on Monday by the most in a day since September 2013, bullion is trading just above the critical $1,100 an ounce support level, another breach of which could lead to a further selloff, traders and analysts say.
An expected increase in U.S. interest rates has driven gold's recent descent along with sluggish demand in top consumers China and India. China disclosed on Friday a 57 percent increase in its gold reserves from 2009, far less than the market had estimated.