Don't chase gold, silver rally - strategist

Further eroding support for gold was a Covid-19 vaccine that Russian President Vladimir Putin said was cleared for use. Globally, coronavirus infections breached 20 million cases, after doubling in six weeks. It took six months to reach 10 million.

Spot gold fell 5.7% to $1 911.89 an ounce in New York, the biggest drop since April 2013. Earlier, the price broke below the $1 921 level that had stood as the record for almost nine years.

Futures for December delivery slid 4.6% to settle at $1 946.30 on the Comex in New York, the largest decline for a most-active contract since mid-March.

"It's quite abrupt and brutal, but the price increase before was even more abrupt and brutal," Carsten Fritsch, a commodity analyst at Commerzbank, said by phone. "The trigger could be the sharp rise in bond yields, which caused some profit-taking and then that cascaded. When people start to take profits, more will follow, and so we see this acceleration of price declines today."

Spot silver dropped 15% to $24.7931, the biggest decline since October 2008.

Whither gold?

"I think the underlying, fundamental, positive reasons for gold haven't gone away," Tom Fitzpatrick, a Citigroup technical strategist, said by phone. "Once the momentum in this lags, we'll probably consolidate for a while, but we still think we might find ourselves back up at $2 400 by the end of the year."

BofA's Widmer says the gold rally has only hit a pause, and reiterated the bank's $3 000 an ounce 18-month target.

"Financial repression is not gone and I think dollar debasement is not gone either," Widmer said. "Implicitly and explicitly, central banks are backstopping governments at the moment, and I think that's really the bullish firmness behind that $3 000 per ounce call."