NEW YORK Gold tanked 4 percent to end below $820 an ounce on Monday, dropping to its cheapest level this year as a soaring dollar against the euro and chart-based sell-stops triggered a bout of long liquidation.
Bullion could still fall further in the near term during the less liquid summer sessions as prices dropped below major support levels and as the dollar continued to strengthen, dealers said.
"It's clearly a technical break. It's clearly the oil and the dollar/euro. You could see some panic here in the gold market now," said Bruce Dunn, vice president of trading at Auramet Trading in New Jersey.
Gold ended at $819.25/820.85 by New York's last quote at 2:15 a.m. EDT, which marked the cheapest price since December 27, 2007. It was down sharply from its previous close of $855.40/857.00 late in the U.S. market on Friday.
Jonathan Jossen, a COMEX floor trader in New York, said that some hedge funds and gold investors were reallocating their portfolios to the equity market after a good recent rally in stocks.
"Everybody's trying to get out the doors," Jossen said. He said gold could test the $780 an ounce level in the near term.
U.S. gold futures for December delivery settled down $36.50, or 4.2 percent, at $828.30 an ounce on the COMEX division of New York Mercantile Exchange.
Monday's losses were the biggest one-day percentage loss since March 19, when gold futures had plummeted 5.8 percent.
Gold failed to hold at a recent high of $850 an ounce, and sell-stops triggered at lower prices accelerated losses.
A sudden resurgence of the dollar against the euro and a lower finish of crude oil triggered the heavy sell-off in gold, with the metal giving up all of its gains it posted earlier in the session.
U.S. crude futures fell $2 on concerns after a drop in crude imports by China.
Gold typically moves in the opposite direction to the dollar, as it is bought as an alternative investment to the U.S. currency.
The U.S. dollar extended gains versus the euro on Monday, breaking the 1.49 level as crude oil prices declined further, boosting U.S. stocks.
Investor interest in gold has been muted by recent price falls. According to data released by the Commodity Futures Exchange Commission, liquidation of commitments to buy led to a drop in net long positions in Comex gold and silver last week.
"Following a third straight week of price declines, noncommercial traders trimmed their net long positions in gold and silver by 10.2 percent and 6.6 percent respectively," said Deutsche Bank in a note.
The volume of gold held by exchange-traded funds also dipped a touch last week. The world's largest gold-backed ETF, SPDR Gold Trust (GLD.P), said its gold holdings dropped 9,000 ounces on Friday.
London-based ETF Securities said holdings of its Physical Gold exchange traded commodity (PHAU.L) fell 1 percent last week to 1.728 million ounces. Holdings of its Physical Platinum ETC (PHPT.L) fell 11.5 percent in the same period, it added.
Meanwhile bullion holdings of the world's largest silver-backed ETF, the iShares Silver Trust (SLV.A), dipped 1 percent on Thursday to 6.197.33 tonnes.
Spot silver ended at $14.62/14.68 an ounce, the weakest level this year, down from $15.23/15.31 late in New York. The metal tumbled to a seven-month low of $14.52 an ounce in early sessions.
Among other precious metals, spot platinum closed lower at $1,517.00/1,537.00 an ounce from $1,543.00/1,563.00 late in New York on Friday.
Spot palladium dropped to $319.00/327.00 an ounce from $332.00/340.00 an ounce, having fallen to its lowest level in nearly a year to $324 on Friday.
Both metals are consolidating after posting losses last week, with platinum down nearly $100 an ounce on Friday from the end of the previous week, and palladium off 10 percent.
(Additional reporting by Jan Harvey in London; Editing by Marguerita Choy)