Gold bullion prices fell to $1,630 per ounce during Monday morning's London trading – 2.3% down on where they started the month – while stock markets and industrial commodities also sold off following the release of preliminary Chinese manufacturing data.
"Gold remains in a short-term bear channel," say technical analysts at bullion bank Scotia Mocatta.
"We would expect a test of support from the long-term uptrend...[which] comes in around $1600."
Silver bullion dropped to near 3-month lows, hitting $31.09 per ounce ahead of the US session.
Ahead of the Federal Reserve meeting which starts tomorrow, the US dollar gained against the euro, despite news that the International Monetary Fund has almost doubled its effective crisis-lending capacity.
European stock markets sold off heavily, with the UK's FTSE down 1.7% by lunchtime, and Germany's DAX off 2.7%.
Activity in China's manufacturing sector has continued to contract this month, according to data published Monday. The HSBC purchasing managers index (PMI) for this month came in at 49.1 – up from 48.3 for March (a figure below 50 indicates sector contraction).
The slight rise in the PMI figure "suggests that the earlier easing measures have started to work and hence should ease concerns of a sharp growth slowdown," according to HSBC's Chief Economist for China Qu Hongbin.
"The pace of both output and demand growth [however] remains at a low level in an historical context and the job market is under pressure. This calls for additional easing measures in the coming months."
The international community has pledged a total of $430 billion in additional IMF contributions – a move that would almost double the Fund's lending capacity – IMF managing director Christine Lagarde revealed at the IMF's Spring Meetings, which ended at the weekend. The US however declined to increase its contribution.
IMF money will not be earmarked for any particular country, an official statement said, although its latest World Economic Outlook last week carried a section on sovereign funding stresses in the Eurozone.
The report advises that the European Central Bank "should lower its policy rate while continuing to use unconventional policies to address banks' funding and liquidity problems."
"None of the advice of the IMF has been discussed by the Governing Council," said ECB president Mario Draghi on Friday.
The government debt of euro-zone nations rose to a euro era high of 87.2% of gross domestic product last year – up from 85.3% a year earlier – according to official European Union data published Monday.