Chart-based selling was triggered on the descent, extending the losses, and funds were among the sellers.
"People seem to be continuing to take money off of the table," said George Gero, vice president with RBC Capital Markets Global Futures.
December gold fell $36.50 to $828.30 an ounce on the Comex division of the New York Mercantile Exchange. September silver lost 71 cents to $14.62.
"The dollar has been extremely strong, and with the weakness in the crude oil, we're hitting a few (sell) stops," said Patrick Donnelly, broker with Peak Trading Group.
Oil - which often leads gold - started the day stronger amid worries that fighting between Russia and Georgia would disrupt energy supplies from the Caspian region. But prices fell back as reports emerged that no damage has been sustained to oil-transport infrastructure so far, plus Georgia is willing to enter into a cease-fire, although Russia so far is not. Around gold's close, September crude was down $2.15 to $113.05 a barrel and bottomed at $112.79, its weakest level since May 2.
A stronger dollar also tends to hurt gold in the short term. And as gold was closing, the euro had fallen to $1.4915 from $1.5006 late Friday. The single European currency fell as far as $1.4910, its lowest level since February.
The sharply stronger tone in equities also contributed to some of the pressure on the metals, Gero added. As gold closed, the Dow industrials were up by around 115 points.
Gold has tended to react to other markets lately, rather than being a "leader," Gero said.
There seemed to be a void of buyers as the metal tumbles, said Leonard Kaplan, president of Prospector Asset Management.
"When they want out, there is nobody to sell to," he explained. "People are getting out of commodities in general. All of the funds are getting out, and there's a lot left."
Donnelly reported that sell stops appeared to be hit in December gold around the $858 area. This was around the lows of $857.50 from Friday and $858.80 from May 2.
Further stops appeared to be hit as the metal tumbled below $850, Donnelly added. December gold fell as far as $825 an ounce, its weakest level since Dec. 20.
Sell stops were hit as September silver fell through the $15.25 area, Donnelly added. The market had held at $15.24 Friday. September silver went on to bottom at $14.535, its lowest level since Dec. 19.
Gero said gold's recent decline is due to longs exiting more so than a big build-up of short positions.
"We have reached a point where normally momentum players would start to sell short," he said. "But we're not seeing that. We're just seeing general liquidation."
This is reinforced by the most recent weekly data from the Commodity Futures Trading Commission, which showed that the net long position of the large non-commercials, or funds, fell to 163,744 for futures and options combined as of Aug. 5, down from 188,354 the prior week. A breakdown of the data shows that the number of total longs fell by 24,707 lots, while the number of total shorts changed little - declining by 97.
Meanwhile, October platinum fell $24.10 to $1,535.50 an ounce, while September palladium declined $8.75 to $322 an ounce.
A trader also cited fund liquidation and chart-related selling in these metals.
"It has to do with oil taking a little tumble, with gold down on the back of that," he said. "When you see a sharp fall like that, especially on the Nymex, it's probably stop losses taken out and people liquidating their positions."
