Gold prices plunge 9%, sharpest fall in 30 years

Gold plunged more than 9 percent to its lowest price in two years in a rout sparked by worries over Chinese growth and a possible sell off by struggling Cyprus's central bank. The main US contract on New York's Comex market, gold for April delivery, sank 9.35 percent to $1,360.60, the drop coming from the beginning of trade. The price hit as low as $1,338.00, a 10.9 percent loss from Friday, before gaining slightly. It was the sharpest fall for the yellow metal since February 28, 1983. Contract volumes were their highest since the launch of trading gold futures in the United States in December 1974, according to Comex spokesman Damon Leavell. It was the second straight session gold futures have plunged, leaving the price far below the $1,600 an ounce level of last Tuesday. Traders said China's unexpectedly low estimate Monday for economic growth in the first quarter, 7.7 percent, sparked the plunge. In addition, cash-strapped Cyprus was reported last week preparing to liquidate some of its 14 tonnes of gold reserves to fund its part of the IMF-EU bailout plan. But the broader view is that with inflation expectations still flat -- as both US and Chinese data indicate -- people who buy gold as a hedge against rising prices have been driven to dump bullion. "A lot of people were trying to get out all at once, going short trying to cover positions, liquidating longs," said Bart Melek of TD Securities.