A wave of sales in Asia on Monday drove the price of gold below the key threshold level of $1,100, as it fell 4 percent to $1,088.05 an ounce. This was lowest on record since March 2010.
Nearly 900,000 lots were traded on a key contract XAU9999=SGEX on the Shanghai Gold Exchange, compared to less than 27,000 lots on Friday, Reuters data showed. Prior to Monday, the volume for July had averaged less than 30,000 lots. This led spot gold to fall 3 percent at $1,107.20 an ounce by 04:23 GMT.
Beijing reported on Friday that its gold reserves increased by 57 percent by the end of June in comparison to the last time it made amendments to its reserve figures, which was more than six years ago.
Nevertheless, the increment was below expectations as gold currently accounts for 1.65 percent of China's total foreign exchange reserves, against 1.8 percent in June 2009.
With Federal Reserve Chair Janet Yellen’s optimism over a nearing rate hike, investors turned to the US dollar and gold prices fell.
"If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate," said Yellen in a testimony prepared for the US House of Representatives Financial Services Committee.
Gold is generally seen as a safe haven for investors and is usually bought in times of uncertainty.