Gold dropped 4 percent on Wednesday as a technical sell-off, year-end fund liquidation and plunging commodities fuelled bullion's second-worst rout since the 2008 economic crisis. Bullion's losses snowballed after it broke below its 200-day moving average - a key technical support it had held for nearly three years. Gold option volatility also exploded as futures investors sought to hedge against downside risk.
"It appears that there is significant amount of forced selling. The way gold is falling it looks like a big fund is blowing up, prompting forced-redemption selling," said James Dailey, portfolio manager of the TEAM Financial Asset Management with $200 million in fund assets.
Spot gold fell 3.9 percent to $1,568 an ounce by 3:26 pm EST (2026 GMT), having earlier hit $1,563.99, its lowest since late September. Silver tumbled 6.5 percent to $28.76 an ounce. US gold futures for February delivery settled down $76.20 at $1,586.90 an ounce. In other precious metals traded, platinum was last down 3.6 percent at $1,416.74 an ounce. Palladium dropped 4.3 percent to $613.65 an ounce.
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