Gold prices tumbled on international markets Wednesday as renewed fears about a looming European recession and rumours of hedge fund selling took the lustre off the precious metal.

The February bullion contract dropped US$76.20 to US$1,586.90 an ounce, one of the biggest selloffs in months.

The selloff hit gold miners on the Canadian markets, pushing the sector down 2.9% and hammering the stocks of big producers such as Barrick Gold Corp. (TSX:ABX), down $1.82, or 3.77%, at C$46.47.

BMO Capital Markets economist Robert Kavcic said the drop came as the U.S. dollar gained ground, especially against the euro.

“We’ve seen a pretty broad-based retreat in commodity prices and it seems like a lot of hedge funds and investors are selling their gold to cover losses elsewhere,” Kavcic said.

He also noted that the price of gold dropped below its 200-day average — a much watched technical indicator — for the first time since January 2009 at the tail end of the financial crisis.

“When you see a technical event like that it tends sometimes to accelerate the selling because a lot of people are trading off those specific technical events,” he said.

Meanwhile, the euro fell below US$1.30 Wednesday on fears that European leaders won’t be able to solve the region’s debt crisis.

It’s the first time the euro has fallen below that level since January. At the same time, the U.S. dollar gained against most other currencies.

“And when you get a strong dollar, you get weaker commodity prices and we seem to be seeing this right across the board,” said Patricia Mohr, vice-president and commodity markets specialist at Scotiabank.

“Gold, in particular, has taken quite a hit today but even stronger commodities like oil are down, over US$5.”

The market verdict — that Europe’s debt problems are still unsolved — comes after five days of accumulating questions about whether a new deal setting limits on the debt of eurozone countries and added contributions to the International Monetary Fund will take full effect.

Wednesday’s gold plummet also followed a pronouncement Tuesday by Dennis Gartman, a widely followed publisher of an investment newsletter, that the run-up in bullion appeared to be at an end.

In his newsletter, Gartman noted the price has been down in recent trading even as China aggressively bought the precious metal.

“One of the oldest rules of trading is simply this: A market that cannot or does not respond to bullish news is a bearish market not a bullish one,” Gartman wrote.

However, Barry Cooper, a managing director of institutional equity research at CIBC, has suggested that the “safe haven” characteristics of gold will play an important role in demand for the metal.

“The robust outlook for bullion remains intact as we continue to see debasing of currencies as the key contributor to gold’s rise,” Cooper said in a recent note to clients.