why suddenly drop so much... panic selling?

From Reuters:

Mon Sep 26, 2011 2:40am EDT

* Gold tumbles more than 4 percent, silver 14 percent

* Gold, silver could see more weakness - technicals

* Coming Up: U.S. new home sales, August; 1400 GMT

(Adds comment, details; updates prices)

By Rujun Shen

SINGAPORE, Sept 26 (Reuters) - Spot gold fell by more than 4
percent and silver suffered its sharpest one-day loss in three
years, extending Friday's rout as invstors bolted for the
ultimate safe havens of cash and the dollar.

A debt crisis in the euro zone that could infect the global
economy is causing a widespread flight to safety that has
hammered commodity markets across the board.

Spot gold dropped to $1,582.69 an ounce, bringing
losses so far this month to 13 percent, the biggest decline
since the financial crisis in October 2008.

Cash silver lost 14 percent to an eight-month low of
$26.65, on course for the biggest daily drop in almost three
years.

"Many have highlighted the risks of gold being in overbought
territory, having gone up in a straight line in the past four
years," said Song Seng Wun, a regional economist at CIMB
Research in Singapore.

"With recessionary pressure piling up, flight to safety
means flight to really safe investments, and those are the U.S.
dollar and U.S. Treasuries."



U.S. gold futures GCcv1 fell 3.2 percent to $1,587.30 an
ounce, and U.S. silver SIcv1 tumbled 12 percent to $26.50.

The dollar, which has rallied nearly 6 percent so far this
year against a basket of currencies , touched a
seven-month high as investors fled risky assets to seek a safe
haven in the greenback.

"The dollar still has room to strengthen more in the short
term because the fear of crisis is not over," said Dominic
Schnider, head of commodity research of UBS Wealth Management in
Singapore.

A stronger dollar pressures gold as it becomes more
expensive for buyers holding other currencies.

European policymakers began working on new ways to stop
fallout from Greece's near-bankruptcy from inflicting more
damage on the world economy after stinging criticism for failing
to stem the debt crisis.

MARGIN INCREASE

Adding to the bearish sentiment, the CME Group raised margin
requirements on gold, silver and copper futures contracts on
Friday after market volatility rose dramatically in the past few
weeks, raising the cost of holding positions.

Speculators cut bullish bets in gold futures and options for
the sixth time in seven weeks in the week ended Sept. 20, as the
price of bullion continued to unravel from its record.


Spot gold fell 8.6 percent last week, its sharpest such drop
in more than 28 years.

"Retail punters are scared," said a Singapore-based trader.
"There is a big dollar buying frenzy now, which is dragging
everything down and people have to liquidate just like 2008."

In 2008, spot gold prices initially shot up after Lehman
Brothers' bankruptcy, but soon tumbled more than 25 percent
within two weeks in October.

Prices of other precious metals also tumbled. Spot platinum
dropped to a 13-month low of $1,504.68.

Spot palladium fell to an 11-month low of $608.99.


This post has been edited by ycs: Sep 26 2011, 03:01 PM

for those holding gold, marc faber said on cnbc just now if gold at 1500 level cannot hold then the next support is at 1100-1200

Is Gold about to crash? What is in store for Gold and Silver? Watch this 2-min video:

http://www.facebook.com/video/video.php?v=284602891566784

Don't buy gold - it's not backed by anything. Pretty funny...