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Apr 16, 2013 at 09:00am IST

Gold slides further, hits weakest level in over two years

Singapore: Gold plunged to a more than two-year low on Tuesday, extending a brutal sell-off that is likely to persist amid fears over central bank sales and global growth, while investors frustrated by the metal's lacklustre performance dumped their holdings. Bullion posted its biggest ever daily drop in dollar terms in the previous session and is now down about 20 per cent so far this year, after stellar gains over the past 12 years.

The precious metal, typically seen as a safe-haven asset, has failed to capitalise on rising tensions in the Korean Peninsula and suffered from uncertainty over the US Federal Reserve's stimulus programme. Cash gold dropped to as low as $1,321.35 an ounce and stood at $1,332.15 by 0144 GMT, down $20.60. The metal is now nearly $600 below a lifetime high around $1,920 an ounce hit in September 2011.

"This is a kind of panic selling. There must be the end of it sometime in the near future, but the market is still very shaky," said Yuichi Ikemizu, branch manager for Standard Bank in Tokyo. "We just have to wait until this panic selling subdues," said Ikemizu, who was reluctant to peg a support level for gold.

Gold slides further, hits weakest level in over 2 years

The metal is now nearly $600 below a lifetime high around $1,920 an ounce hit in September 2011.

Holdings on global gold exchange-traded funds were at their lowest in more than a year. Silver tracked gold lower, while the most active bullion contract on Tokyo Commodity Exchange sank almost 10 percent.

Bullion's collapse caught many veteran investors, who see gold as portfolio protection against inflation and other market risks, by surprise. Monday's drop of around $125 per ounce eclipsed the rout on January 22, 1980, a day after gold hit its then-record $850 on global panic over oil-led inflation due to Soviet intervention in Afghanistan and the Iranian revolution.

In other markets, the yen firmed against the dollar and the euro while commodities extended their sharp declines after investors dumped risk assets overnight as worries over slowing growth in China and the United States took hold

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