GOLD fell the most in two years yesterday, sparking a massive sell-off of related companies and raising fears that the gold price bubble has at last burst.
The metal fell more than 7pc, dropping below $1,400 (€1,071) per troy ounce for the first time since March 2011.
The commodity, which had been used by many investors as a hedge against the economic turmoil in Europe, had traded at nearly $1,800 as recently as October.
Yesterday, though, it fell to $1,381, and is now down more than 20pc in a month.
Gold has been trending down in recent weeks, and had officially entered a bear market earlier this month after falling more than a fifth in two months.
The sell-off was exacerbated by reports that Cyprus may be forced to sell off at least part of its gold reserves to pay for some of its bailout. That has sparked fears that other vulnerable countries may end up having to make a similar move.
Italy has the fourth largest reserves in the world with 2,451 tonnes, while Portugal's 383 tonnes is the 14th biggest reserve. Spain is not far behind with 282 tonnes.
If that level of supply were to come into the market the price of gold would plummet. Weaker-than-expected economic data from China also hit trading.
Dublin-based dealer Goldcore described the sell-off as "vicious" but in a note to clients the firm said "absolutely nothing has changed regarding the fundamentals of the gold market". Several firms, however, are now advising clients to dump the metal.
Last week, Goldman Sachs said it was closing its 'long' position on gold and had switched to shorting the commodity, citing "our economists' expectation that the acceleration in US growth later this year to above-trend pace will support US real rates".
The bank is forecasting a long-term price target for gold of around $1,200.
Societe Generale has also called the "end of the gold era", forecasting an end-of-year price of $1,375 a troy ounce. Silver was also hit, falling more than 10pc.