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NEW YORK (AP) â¿¿ Gold futures have notched their biggest one-day fall in more than a year.
Gold for June delivery plunged $63.50 to close at $1,501.40 an ounce Friday, the largest drop since February 2012. It was the lowest price since July 2011.
One trigger for the slide was a government report Friday that U.S. wholesale prices fell in March by the most in 10 months. Investors tend to buy gold when they expect inflation to increase. Any indication that prices aren't rising will prompt investors to sell gold.
A proposal this week that Cyprus sell some of its gold holdings to help finance a bailout for the country also rattled the gold market. If Cyprus were to sell some of its gold, the thinking goes, so might other economically distressed countries in Europe like Italy, Spain and Portugal.
Gold was already declining in recent months on signs of strength in the U.S. economy and expectations that interest rates might increase. Disagreement among Federal Reserve officials over when to wind down its economic stimulus program has led traders to anticipate that U.S. interest rates might edge higher sooner than previously thought. That would tend to strengthen the dollar and weaken gold, since another reason investors buy gold is to hold it as an alternative to U.S. dollars. When traders expect the dollar to rise, they would sell gold.
Gold peaked at $1,900 an ounce in August 2011, during the market turmoil that occurred after Standard & Poor's downgraded the U.S. government's credit rating. It has more recently traded as high as $1,792 an ounce on Oct. 4. Since then it has fallen $291 an ounce, or 16 percent.
Silver also got caught up in the drive to unload precious metals. Silver for May delivery plunged $1.366 to $26.3310 an ounce, a loss of 5 percent. Gold's daily loss was equivalent to 4 percent.