NEW YORK Commodities sold off on Friday, with gold sinking more than 4 percent to break below $1,500 an ounce, while world equity markets fell after a dour reading of U.S. consumer sentiment and poor retail sales reinforced fears of a weak U.S. economy that would hurt global growth.
Gold fell to its lowest levels since July 2011, hurt by a draft plan for Cyprus to sell gold reserves as part of its bailout by international lenders.
Gold is now some 22 percent below the record peak of $1,920.30 an ounce set in September 2011.
Despite the sell-off in commodities, U.S. stocks trimmed some losses by the session's end to close out the second-best week of gains so far this year.
"The scale of the decline has been absolutely breathtaking," Societe Generale analyst Robin Bhar said. "We tried to rally and that just didn't get anywhere ... There hasn't been any downside support, it's like a knife through butter."
Silver led a sell-off in precious metals, falling 5.1 percent. Other commodities also fell, with Brent oil hitting an eight-month low just above $101 a barrel as the outlook for global crude demand growth dimmed. Brent later pared losses to settle above $103 a barrel.
Investors said the breadth of the sell-off appeared tied to volatility in the price of Japanese government bonds, which has forced certain holders to sell other assets to meet the risk modeling of their investment portfolios.
Both the Cypriot plan to sell gold and volatility in the Japanese bond market are most likely behind the gold plunge, said Jeffrey Sherman, a commodities portfolio manager at DoubleLine Capital LP in Los Angeles.
"The economic sensitive commodities - energy, industrial metals - have been signaling weakness for the past two months and you could see that many investors are now reassessing global growth prospects," Sherman said.
Wall Street fell after the Commerce Department reported U.S. retail sales fell by 0.4 percent in March, the second contraction in three months. Analysts expected that sales would be flat and the decline spurred worries about consumer spending - the linchpin of the U.S. economy.
Also weighing on stocks was a Thomson Reuters/University of Michigan survey that showed consumer sentiment tumbled to a nine-month low in April, with Americans especially gloomy about the long-term health of the U.S. economy.
The drop in oil prices pressured material and energy shares. Quarterly results from JP Morgan Chase & Co (JPM.N) and Wells Fargo & Co (WFC.N) that failed to impress added to the negative sentiment.
"We're due for choppiness given the run we've had, especially since the strong data we've seen recently looks increasingly misleading," said Hank Herrmann, chief executive of Waddell & Reed Financial Inc in Overland Park, Kansas.
"We're moving at a slower pace and those who got overly excited about GDP growth are probably pulling in their horns a bit."
The Dow Jones industrial average .DJI closed down 0.08 points at 14,865.06. The Standard & Poor's 500 Index .SPX fell 4.52 points, or 0.28 percent, at 1,588.85. The Nasdaq Composite Index .IXIC slid 5.21 points, or 0.16 percent, at 3,294.95.
For the week, the Dow rose 2.1 percent, S&P gained 2.3 percent and Nasdaq jumped 2.8 percent.
MSCI's all-country world equity index .MIWD00000PUS fell 0.48 percent, while the pan-European FTSEurofirst 300 .FTEU3 of leading regional shares closed down 0.9 percent at 1,182.10.
European shares snapped four straight days of gains amid concerns about the Cypriot economy and on the euro zone's debt crisis.
German Bunds rose and are expected to advance in coming sessions on concerns Cyprus might need more bailout funds, lifting demand for low-risk debt.
The Bund future was 63 ticks up on the day at 145.88.
Prices for U.S. Treasuries rose, with the 30-year bond gaining more than a point and the yield on the benchmark 10-year note falling to 1.72 percent.
The benchmark 10-year U.S. Treasury note rose 20/32 in price to yield 1.7225 percent, while the 30-year U.S. Treasury bond was up 1-19/32 in price to yield 2.9207 percent.
"A combination of soft activity and extremely benign inflation data is a good signal for U.S. Treasuries, which are poised to rally on these and similar data over the coming months," said Rob Carnell, chief international economist at ING Bank.
A report from the U.S. Labor Department showed wholesale prices fell sharply in March due to lower gasoline costs. The seasonally adjusted producer price index fell 0.6 percent, the largest drop since May, after rising 0.7 percent in February.
Spot gold prices fell $71.98 to $1,488.70 an ounce.
The dollar fell 0.9 percent to 98.77 yen.
Brent crude fell $1.16 to settle at $103.11 a barrel, while U.S. crude oil futures settled down $2.22 to $91.29.
(Additional reporting by Jennifer Ablan; Editing by Leslie Adler, Chizu Nomiyama and Andre Grenon)