An overnight fall in the gold price below $US1400 an ounce sparked a sell-off in local mining stocks, as commodities slipped on weak global economic data and a strengthening US dollar.
The sharp drop in the price of gold for the second time in a month rattled Australia's fourth largest mineral export industry, with gold producers making up seven of the top 10 losers on the benchmark ASX200 index on Thursday. Gold fell to $US1375 an ounce late on Thursday, sinking more than 2 per cent in a five-day losing streak that saw it hit two-year lows.
Copper fell to its lowest level in nearly two weeks on soft data from the US, Europe and China.
Iron ore, Australia's biggest export item, fell to a low of $US126.40 a tonne for the year.
Morgan Stanley commodities analyst Joel Crane said while the fundamentals in commodities remained good, "the issue is that many investors clearly feel there are more compelling places to invest at the moment".
"Uncertainty over growth and stronger supply growth is causing people to look elsewhere."
FC Stone analyst Edward Meir said he expected gold prices to keep softening, reversing a rally after the price collapse in April: "I think we could eventually test those old lows and take them out over the course of the summer."
Shares in goldminer Newcrest Mining fell 5.3 per cent to finish at $15.02, while Evolution Mining, Australia's fourth biggest gold producer, recorded a sharp 11.23 per cent fall in its share price to close at 83¢.
Mr Crane said recent weakness in the prices of commodities was driven by uncertainty over China's macroeconomic outlook and a slowing in demand growth. Despite the softness in the commodities market, he said he believed most prices were bottoming out as the downward pressures reduced.
"Commodities are generally quite forward-looking, and the market was right to pare back at the beginning of the year," Mr Crane said.
Jordan Eliseo, chief economist at precious metal supplier ABC Bullion, said the market was in a "corrective phase".
"Undoubtedly, the incredible rally in the US dollar ... has weighed down sentiment in precious metals due to the inverse correlation with the dollar and gold," Mr Eliseo said.