SAN FRANCISCO (MarketWatch) — Gold futures skidded nearly 5% Wednesday, sinking below the $1,600 level for the first time in nearly three months, as a drop in the euro signaled a new level of anxiety about the region’s debt crisis and investors sought cash as the safest asset.

The decline blew the yellow metal past some long-held technical levels, which then exacerbated the selloff. Silver futures, which often shadow gold’s moves, closed down 7%, copper lost nearly 5% and palladium sank almost 7%.

Gold for February delivery (XCEC:GC2G) settled down $76.20 an ounce, or 4.6%, to $1,586.90 on the Comex division of the New York Mercantile Exchange, the lowest settlement for a most-active contract since mid-July. It was the first time gold had lost grip on $1,600 since late September.

The day’s loss, also its worst since late September, was also a recovery from an intrasession decline. February gold had fallen as low as $1,565.70 an ounce, according to FactSet, representing a $97.40 drop for the day.

A combination of factors sent gold prices lower, with concerns over Europe at the forefront. But in contrast to long stretches of the past two years, investors have been choosing dollar-denominated cash over gold in recent weeks.

“It’s the never-ending European debt crisis still playing out, combined with some year-end profit-taking and a weakening of the euro,” said Jeff Wright, metals and mining analyst at Global Hunter Securities. “A number of funds are rotating into money-market funds in the U.S. It’s safe and they don’t have volatility,” he added.

Gold’s decline early in the session sent the contract below a 200-day moving average of around $1,619 an ounce, its first break below this level since January 2009. The drop deepened from there, pushing the contract below $1,600. Read more on 200-day average breach on the Tell. For more visit: Yahoo finance

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