Gold fell Tuesday as traders begin to doubt that prices can stay near the high they reached this summer.
Credit Suisse analyst Ric Deverell released a report Tuesday saying commodities market has entered a "dangerous new phase."
Deverell said this summer's rally in gold seems to have been overheated. Gold has been overlooked as an investment in part because more traders want park their money in U.S. Treasury securities, which many consider as safe as gold and easier to cash in when needed, he wrote. The popularity of Treasurys took the wind out of gold's rally this month, Deverell said.
"Even prior to that, however, the gold price had already looked over-exuberant during its 28 percent rally during July and August," he wrote in the report.
Gold for December delivery fell $41.70, or 2.5 percent, to $1,616 an ounce. December Silver lost 95.6 cents, or 3 percent, to close at $29.839.
Gold hit a high of $1,891.90 an ounce on Aug. 22. It's down 14 percent since early September. Silver is down 31 percent.
Another big risk for the metals market is the financial turmoil in Europe. Worries about Greece and other countries defaulting on their debt have rattled markets and worsened the risk of another recession. That would batter the prices of industrial metals like copper and palladium, which are used as raw materials in manufacturing.
Industrial metals fell sharply Tuesday on renewed fears that that the European debt crisis could slow global growth and demand at factories.
Kitco Metals Senior Analyst Jon Nadler summed up the market mood in stark terms: "Sell everything," he wrote in a note to clients Tuesday. "In the absence of momentum to the upside, go the easy route."
Copper for December delivery fell 4.7 cents, or 1.5 percent to end at $3.1035 a pound. January platinum fell $48.50, or 3 percent to finish at $1,468.60 an ounce and December palladium dropped $29.60, or 5 percent, to $564.15 an ounce.
In other trading, oil fell to the lowest price of the year. Benchmark oil fell $1.94 to end at $75.67 per barrel on the New York Mercantile Exchange.
Heating oil fell 2.95 cents to finish at $2.7234 per gallon, gasoline futures fell 2.26 cents to $2.4884 per gallon and natural gas fell 2.1 cents to $3.638 per 1,000 cubic feet.
December wheat fell 15.5 cents to finish at $6.04 per bushel, December corn was lost 4.75 cents to finish at $5.8775 per bushel and November soybeans fell 17.5 cents to $11.60 per bushel.