Gold hit its lowest point in almost three years on Wednesday and was on course for a record quarterly loss after U.S. data reinforced expectations for an end to ultra-loose monetary policy.
Prices could slide to levels below $1,000 US per ounce, investors and analysts said, with stock markets rising and scant potential for U.S. or European data or developments to reverse an accelerating move out of bullion.
"Equities are up again. People want risk-on and gold is therefore seen as a source of cash and not as a safe haven, because that's not needed," said Simon Weeks, head of precious metals at the Bank of Nova Scotia.
Strong gains in U.S. orders for durable goods, the largest annual rise in house prices in seven years and rising consumer confidence fuelled speculation the Fed would rein in its $85 billion monthly bond-buying programme, which had helped push gold prices to record highs in recent years.
Spot gold slumped to its lowest since August 2010 at $1,223.54 an ounce and was down 3 percent at $1,237.81 an ounce at 1431 GMT. U.S. gold futures for August delivery were also down 3 percent at $1,236.70, having hit a low of $1,223.20.
"We bought gold for two reasons - because we were worried about the inflationary impact of policy and because we thought the financial system was going to fall apart," said Sean Corrigan, chief investment strategist at Diapason Commodities Management.
"Although it may be completely the wrong judgement, the market has decided that none of those at the moment is a concern."
Spot prices have fallen more than a quarter this year and by 22.8 percent this quarter, their biggest quarterly loss since Reuters data began in 1968.
"If you look at yields, they are going higher, and people are more bullish on the dollar - all of this creates a difficult environment for gold," UBS analyst Joni Teves said.
European share markets were up Wednesday. Gains in global stock markets this year will be a signpost of
more losses in gold, analysts say.
ASIA DEMAND EYED
The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Shares (GLD-N), reported the biggest one-day drop in its holdings in more than two months at 16.23 tonnes on Tuesday. That brought the fund's total outflow for the year to 381 tonnes.
"There has been 550 tonnes of gold sold out of ETFs since mid-February," Natixis analyst Bernard Dahdah said. "That's the equivalent of saying we've added to the gold market an additional 11 percent on top of 2012's gold (mine) output."
Demand in number one consumer India is likely to fall this quarter as the government has curbed gold imports to reduce a record current account deficit.
In the latest move, India's central bank told rural regional banks on Tuesday they could no longer provide loans against gold jewellery and coins.
Worries about a liquidity crunch in China, the world's second-largest gold consumer, drove down share prices despite attempts by the Chinese central bank to soothe markets. Physical gold demand could be hurt by a slowdown in Chinese growth, analysts said.
Silver prices fell further than gold, shedding more than 5 percent to its lowest since August 2010 at $18.39 an ounce. Spot prices were later down 3.5 percent at $18.88 an ounce.
