It's a combination of things. But it is insane, of course with HF algo traders there is no sense of sane or insane--just reactions to the previous trade.
Here's how totally nuts the pm market is:
Friday and Monday the Comex saw almost one million futures contracts traded, which represents about 100 million ounces, or 3,000 tons. Contrast that with the puny 10 tons (about $400 million worth) of gold that Cyprus is supposedly going to sell, which was reputedly responsible for starting the selloff. Three thousand tons of gold is about 10% more than an entire year's mine supply and the sum total of just about all of what Europe owns. In other words, that was a massive amount of volume, and a gargantuan break.