Gold dropped to levels last seen in September 2010 on Thursday, falling $97 or over 7% an ounce to $1,277 in New York.
Silver was also hard hit, down more than 9% to below $20 an ounce for the first time in two-and-half years.
The sell-off on precious metals markets comes after chairman Ben Bernanke hinted the US Fed Federal Reserve's ultra-loose monetary policy may come to an end this year.
The Fed has been reviewing its quantitative easing program and is eager to throttle back asset purchases at the first signs of a solid economic recovery in the US.
When the Fed starts tapering off QE, which floods markets with cheap money, it will further strengthen the US dollar and tarnish gold's status as a storer of wealth.
The first QE program was announced by Bernanke in December 2008 when an ounce of gold cost $837.50.
Even with the dramatic sell-off on precious metals markets this year, an ounce of gold is still worth 50% more than before QE.
The Fed's balance sheet crossed the $3 trillion mark early into 2013 through the buying of Treasurys and mortgage bonds to the tune of $85 billion a month.
If the central bank's program remains in place unchanged, the Fed's assets buying bill will top $4 trillion before the end of the year.
Gold has declined nearly 24% this year following unprecedented outflows from gold-backed exchange traded funds and early indications that QE may end sooner rather than later.
ETF holdings of gold have declined to the lowest in more than two years and some 500 tonnes of the metal have been withdrawn since holdings hit a record of more than 2,600 tonnes in December 2012.
Gold is now firmly in the grip of the bears and if and when the Fed slows down the dollar printing presses it would remove a significant factor that has been keeping a floor under the price.
Global stocks also reacted negatively to the impending end of easy money with the Dow Jones dropping 360 points on Thursday following a 200+ drop yesterday.