US benchmark gold futures plummeted 3.8 percent early on Friday, and other metals also sank heavily, as a stronger US dollar sparked speculative liquidation in the volatile hard assets, dealers said.
Silver prices approached a one-month low, palladium lost more than 10 percent at one point and platinum also retreated.
Traders were unwinding short dollar holdings and switching out of metals in choppy financial markets this week, and dealers said the liquidation was mainly profit-taking from the recent spike to multiyear and record highs.
"The precious metals are coming under fire amid what is rapidly becoming a wholesale liquidation by speculative longs," said Greg Weldon, publisher of the Metal Monitor report.
Gold for June delivery was down $25.90 at $655 an ounce by 10:40 am EDT on the New York Mercantile Exchange's COMEX division, trading from $688.90 to $657, which was its weakest price since April 25.
Comments by US Treasury Secretary John Snow that the United States was committed to a strong dollar and to keep pressuring China to make its currency more flexible also knocked gold prices by boosting the greenback, traders said. Gold has traded inversely to the dollar's moves though it was not tracking the currency tick-for-tick.
COMEX gold spiked last Friday to a 26-year high of $732 an ounce before a prolonged sell-off dragged it to fresh lows.
"After more than three months of a marathon run, the gold market took this week to finally begin a decent correction," said Jon Nadler, analyst with bullion dealer Kitco.
After prices had erased nearly $100 from the quarter-century peak scaled last week, he said the next key technical levels were proving to be $650, followed by $630. Spot gold slid down to $653.10/653.90 an ounce, from $680.30/1.10 at Thursday's New York close. Friday's afternoon bullion fix in London $651.50.
COMEX July silver dropped 39 cents, or 3 percent, to $12.13 an ounce, moving from $12.79 to $12.08, a low since April 25. Spot silver fell to $12.15/12.25 an ounce, against $12.56/12.66 previously. It fixed at $12.43.
NYMEX July platinum tumbled $11.60 to $1,286.20. It rose to a lifetime high of $1,347 Wednesday. Spot platinum slipped to $1,285/1,290 an ounce. June palladium plummeted $32.50 or 8.7 percent to $340 an ounce, after it touched a six-week low of $330. Spot traded down to $337/342.