Poor economic data from China has led to tumbling gold values– with the precious metal falling to the lowest price in two years.
Other precious metal and commodity prices, like oil, have followed suit, with prices dropping to disappointing levels.
The world’s stock exchanges were also taken by surprise by the Chinese announcement and share prices also slipped back.
The crisis started when China issued disappointing growth figures, which analysts believed are a setback for the world’s economic recovery.
As a result of the gold sell-off, gold prices dropped below the widely acknowledged important barrier of $1,500 or £980 an ounce.
Biggest slump in 30 years
The commodity also recorded the biggest slump in 30 years when prices between Friday’s opening and Monday’s closing showed a 13% drop.
At the lowest point, gold was selling for $1,338 (£873) an ounce.
Traders also feared that central banks in many developed countries are ending fiscal stimulus programs, which put the skids under gold prices as the precious metal appeals as a hedge against inflation.
The news that Cyprus’ also had to sell 10 tons of gold reserves to help fund the recent Eurozone bail out did not help the market.
The Chinese data revealed the nation’s economy grew by only 7.7% in the first quarter of 2013, which was well below the market’s expectation of an 8% expansion.
This is the weakest quarterly figure that the world’s second largest economy has posted in 13 years.
In addition, China is also experiencing a slower increase in industrial production and fixed asset investments – despite the growth in lending in March.
Bull run ended
The poor figures also led to concerns for oil prices, which also tumbled.
The jitters on the stock markets were compounded by news from America that the economy probably is not going to see a strong rebound this year, after news of poor employment figures, soft retail sales and falling consumer sentiment.
American analysts are also concerned after the Federal Bank indicated that the quantitative easing program will reduce, which will lower inflation and make holding gold less attractive.
There’s no doubt that gold has taken a battering and it looks increasingly likely that the metal’s 12 year bull run has now come to an end.
Meanwhile, traders are looking at the scale of gold’s sell-off , which saw huge amounts shifted, and they are searching for a reason for the sudden drop. Although gold prices have recovered slightly, values look unlikely to climb higher for some time.
