"There was some heavy selling on the Shanghai Gold Exchange this morning," said Victor Thianpiriya​, ANZ precious metals analyst. "Half-an-hour after the market opened we saw five tonnes of gold sold through the Shanghai gold exchange, which is way above normal levels. "I don't believe this was a result of fundamentals. Silver prices usually move in tandem with the gold price. That wasn't the case this morning." Mr Thianpiriya said the sale was probably an isolated case of speculation. "It seems to me that someone was taking advantage of a timezone with lower liquidity. It looks like speculation or perhaps foreselling of some sort but obviously very hard to know for sure."

Earlier in the day, gold fell to a five-year low pressured by a strong US dollar and expectations for a US interest rate cut. The episode is the latest in a string of declines for the precious metal, which was trading at $US1187 an ounce a month ago. Gold has fallen from favour with investors as the Federal Reserve prepares to raise US interest rates this year, boosting the greenback. And when China updated its bullion reserves on Friday for the first time since 2009, the increase was smaller than had been estimated. "It's a combination of factors: softer Chinese gold demand, the rising US dollar and what we've seen this morning being compounded by the triggering of a number of stop losses," said Pengana Capital portfolio manager Tim Schroeders. "All of that put into the mix, when people are very nervous, creates the environment and the price action we're seeing today."

ANZ head of commodities Mark Pervan​ said expectations of a US rate rise – and the impact of that on the US dollar – remained the main headwind for bullion. Another headwind on bullion may be the easing of the Greek debt crisis, said Mr Pervan. "Maybe it held up during the Greece issues. What could be happening is the unwinding of the risk premium that looked like it wasn't in gold but effectively probably was – the gold price should have been weaker," he said. Furthermore, the People's Bank of China revelation on Friday that it owns about 1658 tonnes of bullion was far less than expectations, he said. "The market consensus was that it would have been close to 3500 tonnes. Coming in at 1600 tonnes tells you that China's central bank purchases don't look like the same tailwind for gold as first thought … it was well under expectations."

Gold fell just over $US10 per ounce on the Chinese announcement on Friday. Although the price of gold in US dollar terms has reached a six-year low, the price of gold in Australian dollar terms – $1534.71 per ounce – is still well above the levels of 2013 and 2014, when it was trading between $1300 and $1400, due to the declining Australian dollar. Deutsche resources analyst Brett McKay said the falling Australian dollar was a cushion for local gold stocks – and would maintain the price of gold in Australian dollars while gold in US dollars fell. Deutsche's forecast was for gold in US dollars to dip below $US1100 over the next 12 to 18 months, to be offset by the Australian dollar dropping to US62¢ by 2018. "The Australian dollar gold price goes up on our numbers." Mr Mckay said the Australian dollar gold price was down from the year's highs of $1642, but "it's nowhere near as off as the US dollar gold price".

"In terms of cash flow generated for the domestic miners it should still be pretty good." Mr McKay said the current gold price in Australian dollars provided a comfortable margin for local miners dealing with costs of production. "They should all still be cash generators," he said. "Other aspects of the industry have worked in their favour: fuel prices are down, labour costs are far more competitive. Drilling and development costs have come right down.

"Things are working in their favour. They've reduced headcount considerably so their margins should remain pretty robust. I'd expect the domestic gold producers to be generating a decent amount of free cash." Mr McKay said that while capital projects "had been few and far between", "mergers and acquisitions would replace some of these capital budgets". Most of the gold stocks rated by Deutsche were rated "hold", with the exception of Newcrest, which was rated "sell", said Mr McKay.