A surprise deceleration in Chinese first-quarter growth added to signs of a weakening global economy, the latest reason to dump gold amid a bear market for the precious metal.
The world's No. 2 economy expanded by 7.7% in Q1 from a year ago, below expectations for 8% and Q4's 7.9% pace. The unexpected slowdown dampened hopes China is rebounding from a relative soft patch to help pull the rest of the world with it.
The news also comes as U.S. data have deteriorated, including job growth, retail sales and now housing. Homebuilder sentiment slid for the third straight time in April to a six-month low.
U.S. stock indexes fell sharply, led by miners. Gold tumbled $140.30, or 9.3%, to a two-year low of $1,361.10 an ounce. Oil, copper and other commodities fell hard on expectations for less demand, especially from China.
Gold fell last week on fears Cyprus and other indebted European countries will be forced to sell their gold reserves to meet bailout conditions.
Speculators are selling other commodities to cover gold margin calls, analysts said. The Shanghai Gold Exchange may hike gold and silver trading margins .
The stock market's prior robust gains have spurred a shift away from gold, analysts noted. While gold's correction could drive demand in China, India and other emerging markets, doubts remain about future buyers.
"Anyone who wanted it had bought it already," said Ed Carlson, founder of Seattle Technical Advisors. "At some point, no matter how fundamentally attractive an asset class is, there is just no one left to buy it.
Gold is selling off despite central banks in the U.S. and Japan creating massive amounts of money to inject in their respective economies. Lending in China is also ballooning.
Such stimulus had made gold attractive as an inflation hedge, but inflation has cooled or remained subdued recently. The latest decline in oil should contribute even more downward pressure on prices.
"Deflation is the keyword now, and all the talk of hyperinflation has gone out the window for now," Janice Dorn, a veteran gold trader, told IBD. "Until this changes, gold will continue to underperform.
China's March consumer prices rose 2.1% annually vs. 3.2% in the Lunar New Year month of February and 2% in January.
Industrial production in Q1 grew 9.5% annually, down from 10% in Q1 2012. Retail sales rose 12.4% vs. 14.3% a year ago, despite efforts to make the economy more reliant on consumption instead of investment.
While bank and non-bank credit more than doubled in March to a near-record high, real estate seems to be benefiting more than the real economy. Q1 property sales revenue leapt 61%.
Beijing has tried to stem real estate speculation, but the Chinese still have relatively few investment options, said Sung Won Sohn, an economist at California State University Channel Islands.
"There are too many vacant condos and office buildings," he said. "They surely have a real estate bubble."