NEW YORK: Gold sank as much as 5.3% on Tuesday, facing its worst one-day rout in seven years, as a return of risk appetite following encouraging economic numbers and hopes of new coronavirus relief package boosted the S&P 500 to near record highs.
Other precious metals also took a beating, with silver plunging as much as 13.8% - its biggest daily decline since October 2008. It was down 13.4% to $25.24 per ounce by 1:59 p.m. EDT (1759 GMT). Platinum dropped 4.7% to $940.08, and palladium slid 4.7% to $2,116.33.
"This feels like a mini crash. We could not overcome the early morning headlines of a Russian potential vaccine, and there was just continued optimism flowing into stocks," said Edward Moya, senior market analyst at broker OANDA.
Spot gold tumbled 5.2% to $1,921.50 per ounce, retreating sharply from Friday's record high of $2,072.50 and was set for its worst day since June 2013.
US gold futures settled down 4.6% at $1,946.30.
The better-than-expected economic data helped accelerate the sell-off, but the outlook remains bullish for gold, Moya said.
US producer prices rebounded more than expected in July, and the US S&P Global index moved closer to record highs.
Gold's record-breaking rally, driven by expectations of further stimulus and a weaker US dollar in the face of a surge in virus cases, was also tempered as higher US Treasury yields made non-yielding bullion less attractive.
"The precious metals complex was driven by a drop in rates, a steady increase in inflation expectations and a falling US dollar. The rally is now giving up some of these gains as these drivers lose momentum," said Bart Melek, head of commodity strategies at TD Securities in a note.
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