Gold was hit hard Monday by a wave of selling in Asia on concern...

Gold was hit hard Monday by a wave of selling in Asia on concern that China and India, the world's two biggest buyers, may be losing their enthusiasm for the metal.

The price fell 4% to $1,420 a troy ounce, matching the Friday's drop that had sent it into bear-market territory—down 20% from the high reached in August 2011.
Asian buying has helped prop up gold prices for years, but concerns are growing the prop is weakening. China reported its economy unexpectedly slowed last quarter, spurring worries that Chinese consumers, less cash in hand, may cut back on gold purchases. And India's largest gold-industry group warned that the recent slide in price has caused a loss of confidence in the metal there.

"The market saw gold going lower and everyone panicked," said Pradeep Unni, head of research at Richcomm Global Services, a Dubai-based commodity broker. "The most important factor for gold now is Indian and China demand."

A gold bar on display in a Tokyo department store; the shine has come off the metal, down more than 20% from its 2011 high, including 4% drops both Friday and Monday.

The fall took some by surprise, with Singapore-based traders saying they hadn't been prepared for the heavy losses. While China's growth data is always keenly watched, it seldom causes such large moves in gold and other markets. Silver also slid, dropping 6.8%, while stock markets across Asia slipped. Among the biggest losers, some down more than 10%, were Australian gold miners and Indian businesses that lend money with gold bars and jewelry as collateral.

The slowdown in Indian buying comes just as the peak wedding season is kicking off—a traditional time for buying gold ornaments as gifts for brides.

"Some seasonal buying is there due to the wedding season, but the demand is thin," said Haresh Soni, Chairman of the All India Gems & Jewellery Trade Federation. "People are not comfortable entering the market now. They will wait for some more time for the rates to stabilize."

Mohit Khamboj, President of Bombay Bullion, estimates that for the next week at least about 1.5 tons of gold will be sold daily by long-term investors in Mumbai alone. That's a sudden shift from two months ago when Indian investors were bullish and buying.

"Gold investments are increasingly looking like a bubble," said Mr. Khamboj. "Long-term investors will look to book their profits in the current market environment."

T.K. Chandran, director of the large chain DKTM Jewelry Ltd., based in south India, says the Indian New Year festival over the weekend was causing some jewelry buying. Still, DKTM is among the jewelers offering discounts on gold products to boost demand.

Bearish signals for gold are being seen elsewhere as well. In Cyprus, a draft document proposed central-bank gold sales of over $500 million to help fund a bank bailout. That's helping push investors around the world out of the falling precious metal and into stock markets, many of which have posted strong gains since the start of 2013.

"After news that Cyprus is selling its gold, there's speculation that other debt-ridden countries might sell theirs," said Joyce Liu, investment analyst at Phillip Futures in Singapore. She added that many automatic sell orders were triggered when the gold fell below $1,475 an ounce, which quickened the latest fall.
—Debiprasad Nayak in Mumbai contributed to this article.