Wholesale market gold prices touched their lowest level since the first week of January on Friday, hitting $1,574 an ounce before recovering some ground, while stocks and commodities fell and US Treasury bonds gained, with dealers in major gold buying countries reporting continued limited demand for precious metals.
Silver prices fell to $28.54 an ounce – also a four-month low, and 6.1% down on last Friday's close.
Heading into the weekend, spot market gold prices looked set for a 3.7% weekly loss by Friday lunchtime in London. Based on PM London Fix Gold prices, the week ended March 2 was the last time gold fell further in a single week.
On the currency markets, the euro fell to its lowest level against the dollar since Jan. 23 – two days before the Federal Reserve published policymakers' interest rate projections for the first time, showing a majority expected near-zero rates until at least late 2014.
The US Dollar Index – which measures the dollar's strength against a basket of other currencies – hit its highest level since March 16 this morning.
"When the market gets very nervous, then they buy dollars and gold finds it difficult to rally," says Jesper Dannesboe, senior commodity strategist at Société Générale in London.
"Given what's going on in the markets at the moment, any rally will probably just be a bounce before another setback."
The Reserve Bank of India ordered exporters to convert 50% of their foreign exchange holdings to rupee Thursday, a day after the currency closed at an all-time low against the dollar in Indian trading.
Despite the central bank's move, however, the rupee again fell against the dollar on Friday, at one point coming within 0.6% of Wednesday's low. Rupee gold prices however still traded slightly lower this morning. The most heavily traded gold contract on Mumbai's Multi Commodity Exchange, the June delivery contract, touched its lowest level in over a month during Friday's trading.
"Slowly deals are taking place as market is in the falling mode," one dealer told newswire Reuters.
"Traders will try to catch the bottom...[but] people will not be willing to maintain huge inventory in a falling market and only resort to need-based buying."
Over in China – behind India the world's second-largest gold buying nation last year – some gold dealers say they expect to see gold demand growth fall this year.
"Chinese consumers share a quite pronounced tendency in which they usually buy gold when prices are rising and refrain from purchasing when prices are conceived to be on a downtrend," says Xin Zhihong, vice president at Shanghai jeweler Lao Feng Xiang.
"Some consumers are now sitting on the sidelines...the expectation that gold prices will always rise and that gold's value can only appreciate seems to have faded."
"It's the worst start of the year [for Chinese gold demand] since the financial crisis in 2008," adds Emily Li, brand general manager at Chow Sang Sang, the second-biggest gold jeweler in Hong Kong.
China's gold imports from Hong Kong – seen by many as a proxy for overall imports – rose 59% month-on-month in March, figures published this week show. The 63 tonnes figure however was 39% down on last November's all-time high, while the volume of gold heading from China to Hong Kong also rose, leaving net exports in March at 38 tonnes.