Other precious metals also took a beating, with silver plunging as much as 8% – its biggest daily decline since mid-March. It was down 7.2% to $27.06 per ounce by 11:29 a.m. EDT (1529 GMT), platinum dropped 3.3% to $954.07 and palladium slid 4.2% to $2,125.61.
“This feels like a mini crash. We could not overcome the early morning headlines of a Russian potential vaccine, and there was just continued optimism flowing into stocks,” said Edward Moya, senior market analyst at broker OANDA.
Spot gold tumbled 4.1% to $1,943.54 per ounce, retreating sharply from Friday’s record high of $2,072.50 and was set for its worst day since June 2013.
US gold futures dropped 3.9% to $1,960.40.
The better-than-expected economic data helped accelerate the sell-off, but the outlook remains bullish for gold, Moya said.
US producer prices rebounded more than expected in July, and the US S&P Global index moved closer to record highs.
TD Securities expects a deeper pullback as macro factors that have driven gold higher in the last few months are tapering slightly, said Daniel Ghali, commodity strategist at the company.
Gold’s record-breaking rally, driven by expectations of further stimulus and a weaker US dollar in the face of a surge in virus cases, was also tempered as higher US Treasury yields made non-yielding bullion less attractive.
“Ultimately, we still think gold has room to run higher, but in the very near term here we do think that the pullback will be large,” Ghali said.