Silver prices tumbled and gold dropped to one-month lows on Friday

Silver prices tumbled and gold dropped to one-month lows on Friday, amid a sell-off in commodities as fear heightened that the global economy could plunge back into a recession.

The base metals complex tumbled, led by a 13 per cent loss in the London tin . Asia’s stock market also slid and emerging market currencies fell amid fears the developed world is stumbling back into recession.

The world’s major economies pledged to prevent Europe’s debt crisis from undermining banks and financial markets, and said the euro zone’s rescue fund would be bolstered.

The news came a day after US Federal Reserve Chairman Ben Bernanke warned of significant downside risks for economic growth, which triggered a sell-off in equities and commodities.

Spot gold fell as much as 0.9 per cent to a one-month low of $1,719.8 an ounce, before recovering most of the losses to $1,734.69 by 0635 GMT.

US gold shed more than 1 per cent to $1,722.3, its lowest since Aug. 25. It stood at $1,737.30, headed for a 4.4 per cent loss from a week earlier, its sharpest weekly loss since March 2009.

“It’s recession fear,” said a Hong Kong-based dealer, adding that investors fear policy makers around the world have a very limited choice of tools to spur economic growth, as interest rates are already low in major developed economies.

“Gold may test $1,700, but $1,650 should provide very good support.”

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