NEW YORK (MarketWatch) -- Gold futures tumbled more than 4% Thursday to their lowest level in one month, as nervous investors sold futures contracts to seek cash.

Some hedge funds were forced to liquidate their positions to cover losses in stocks and other markets, according to economists at research firm Action Economics.

"For the moment, the weight of the deep funk felt in the global markets is keeping gold on the defensive, while would-be buyers ... find more comfort sitting on the piles of cash," said Jon Nadler, senior analyst at Kitco Bullion Dealers.

Gold for December delivery fell $34.50, or 4.1%, to end at $804.50 an ounce on the Comex division of the New York Mercantile Exchange, the lowest closing level since Sept. 17. It slumped more than 5% to $791 an ounce earlier.

The contract has surrendered $102 an ounce, or 11%, since Oct. 8.

Also pushing gold prices lower were news reports that central banks were selling gold. The latest weekly data from the European Central Bank showed 7.6 tons of gold was sold during the week ended Oct. 10, according to Bloomberg, citing Barclays Capital.

Central banks sell gold to earn more cash, but their selling is helping push the gold prices lower, analysts said.

Gold lease rates charged by central banks have reached record highs, according to the London Bullion Market Association, indicating central banks' unwillingness to lend gold to financial institutions on worries that it may not be returned.

Gold's losses came amid declines in some global stock markets. Stocks in Europe and Asia recorded sharp losses, while U.S. stocks climbed. See Market Snapshot.

"Investors worldwide are selling everything, including the kitchen sink, and gold is no exception," said Peter Grandich, chief commentator at Agoracom, an online marketplace for the small-cap investment community.

On gold exchange-traded funds, assets in the SPDR Gold Trust, the largest gold ETF, were unchanged at 767.58 tons Wednesday but down from Monday's record of 770.64 tons, according to the latest data from the fund.

The SPDR Gold Trust GLD, +0.84% dropped 4.8% to close at $79.29 on the New York Stock Exchange.

Analysts had projected gold prices to rise as demand for the precious metal as a safe haven is expected to increase amid the financial turmoil, but gold has repeatedly defied their expectations and has closed lower in the previous five straight sessions.

"Nervousness was the main feature among participants," said Kitco's Nadler.

Key U.S. economic data released on Thursday showed retail-level inflation under wraps. See Economic Report.

Some analysts worried that in the long term, the global rescue plans to inject liquidity into the market will stir inflation -- something that would be a bullish sign for gold prices as investors tend to buy the metal as a hedge against rising prices.

In other metals action, December silver dropped 5% to $9.64 an ounce.

Copper for December delivery dropped 5.7% to $2.0855 a pound. January platinum tumbled 8.6% to $891.30 an ounce, and December palladium plunged 12% to $173.10 an ounce.

In spot trading, the London gold-fixing price -- used as a benchmark for gold for immediate delivery -- stood at $802.50 an ounce Thursday afternoon local time, down $44.50 from Wednesday afternoon.

On the equities side, the Amex Gold Bugs Index HUI, fell 9.2% to end at 210.12 points. IShares Gold Trust IAU, +0.94% slid 5% to close at $79.39, while the iShares Silver Trust ETF SLV, +2.18% fell 6.5% to finish at $9.60.