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. Last Updated: 07/27/2016

Gold Price Plummets To Lowest In 12 Years

LONDON -- Gold fell Wednesday below $300 an ounce, hitting a 12 1/2-year low in a market worried about central bank bullion sales and weak demand in East Asia.

The price of gold on the London Bullion Market dived $4.40 to $297.65 per ounce by midday local time.

The meltdown was sparked off overnight in New York by technical trades. It then spread to Asia, where prices plummeted in Hong Kong, Sydney and Bombay.

"It's a revolution. Gold no longer seems to be a major asset," said Andy Smith, a gold analyst in London for Union Bank of Switzerland.

"It's like a currency finding a new value," he added, warning of a continuing downward spiral in gold prices.

Comments by Bank of England Governor Eddie George on Friday that the European Central Bank would not need to hold large deposits of gold reinforced fears about central bank gold sales.

To add to the gloom, the crisis in East Asia has dampened demand for bullion in the region, a major gold consumer.

Instead, it has prompted selling.

"Everyone thought it [the Asian turmoil] would help gold because of its role as a safe haven, but it didn't because Asia is suffering from asset deflation which requires gold selling," Smith said.

If India, the world's largest consumer of gold, is forced to devalue its rupee currency, this might unleash a wave of gold sales there, analysts warned.

The bullion market has no hope of recovering because central bankers continue to unload gold stocks for higher-yielding assets such as U.S. or German bonds and the dollar, analysts said.

The Reserve Bank of Australia stunned markets in July by selling two-thirds of its gold hoard in a secret sale.

Switzerland's announcement in October of plans to sell 1,400 tons of gold held by the Swiss National Bank drove prices down to a more than 12-year low.

Although the Swiss later said they would sell only 950 tons, this failed to lift the market's spirits.