NEW YORK Gold prices plunged to their lowest in more than five years on Monday, at one point dropping 4 percent on aggressive selling out of China, while the U.S. dollar hit a three-month high on expectations for higher U.S. interest rates.
Equity markets posted modest gains, with the focus remaining on earnings season.
The dramatic sell-off in gold came in a matter of minutes in Shanghai. More than 33 tonnes of gold, worth about $1.3 billion, traded in two minutes.
The exact reason for the selling was unclear. Recent strength in the U.S. currency and expectations for higher U.S. rates have undermined the case for holding gold and other precious metals, while analysts also note that China imported a record volume of gold in 2013 that has created an oversupply situation. Still, the swiftness of the decline surprised traders and resulted in two separate trade halts in U.S. gold futures.
The spot price for gold XAU= was at $1,094.5 an ounce, after hitting a low of $1,088.50 overnight.
"We have breached significant support levels, we know U.S. rate hikes are coming, there is no inflation and there is no catalyst to hold gold when other markets are doing better," Societe Generale analyst Robin Bhar said.
Other commodities were sinking as well. U.S. crude oil CLc1 fell 93 cents to $49.96, the first time it has been below $50 since April. Brent crude LCOc1 was last down 59 cents a barrel at $56.51.
The dollar jumped to its highest since April 23 against a basket of major currencies .DXY but was then flat on the day.
The greenback posted its best weekly performance in about two months last week after Federal Reserve Chair Janet Yellen reiterated that U.S. interest rates will probably rise later in the year.
Global equity markets held close to Friday's three-week highs .MIWD00000PUS and European shares approached seven-week peaks as Greece-related fears continued to recede.
The country's banks reopened for the first time in three weeks following a deal to start talks on a new bailout. The pan-European FTSEurofirst 300 .FTEU3 index rose 0.3 percent to its highest since late May.
On Wall Street, the Dow Jones industrial average .DJI rose 13.96 points, or 0.08 percent, to 18,100.41, the S&P 500 .SPX gained 1.64 points, or 0.08 percent, to 2,128.28 and the Nasdaq Composite .IXIC added 8.72 points, or 0.17 percent, to 5,218.86.
The Nasdaq hit a record on Friday after strong results from Google (GOOGL.O). Tech earnings will dominate reports this week. Investment bank Morgan Stanley's (MS.N) shares fell 0.4 percent following its results.
The euro EUR= fell to its lowest since late May on the EBS trading platform but last traded up 0.06 percent at $1.0838. The yen JPY= dropped 0.2 percent to 124.38 to the dollar.
The yield on the 10-year U.S. Treasury bond US10YT=RR rose to 2.377 percent, as the price fell 6/32 of a point.
(Additional reporting by Manolo Serapio Jr in Manila; Editing by Dan Grebler)