SAN FRANCISCO (MarketWatch) — Gold futures dropped 5.6% Wednesday, their biggest one-day percentage drop since March 2008 as a mild correction that started the previous day swelled to a sudden rip current of selling.

Gold for December delivery GC1Z dropped $104 to settle at $1,757.30 an ounce on the Comex division of the New York Mercantile Exchange.

That was gold’s worst day since March 19, 2008, when the then most-active contract lost 5.8%.

The contract fell $30.60 Tuesday to end at $1,861.30 an ounce. Gold last hit a settlement record on Monday, when it finished at $1,891.90 an ounce.

Japan rating; Groupon China retreat

Investors booked their profits after the metal failed to conquer $1,900 an ounce, analysts said. Read blog post about gold’s 10 worst days.

“People who made a lot of quick bucks are leaving the trade to return at lower points,” said Matt Zeman, head trader and strategist at Kingsview Financial in Chicago.

Investors favored investments considered riskier on Wednesday, with higher equities and a lower dollar siphoning interest out of gold, he said.

Markets were also abuzz with talks of a possible margin requirement increase in the U.S. after the Shanghai Gold Exchange raised its margins Tuesday.

Investors are worried the CME Group Inc., the Comex parent company, could follow suit. CME raised gold margin requirements two weeks ago responding to increased volatility amid a meteoric rise for bullion in recent weeks.

Until Wednesday, the metal had gained about 25% from lows in early July. Several analysts have called for gold at $2,000 an ounce in a matter of weeks, and large banks such as Citigroup and UBS upgraded their price forecasts in recent days.

The first alarm bells were rung by investors leaving SPDR Gold Trust GLD, -0.60% , the largest exchange-traded fund backed by gold.

SPDR Gold Trust lost nearly 25 metric tons to end Tuesday, the last day for which statistics are available, at 1,260 metric tons.

Holdings have steadily fallen since they hit 1,310 metric tons two weeks ago, inching closer to a record 1,320 metric tons scored in June 2010.

Earlier this week, State Street Global Advisors announced SDPR Gold Trust’s net assets surpassed the SPDR S&P 500’s SPY, +0.75% to become the largest ETF as measured by net assets.

“To me, that just signaled a lot of new, unsophisticated investors in the market,” said Bill O’Neill, a principal with Logic Advisors in New Jersey.

Gold futures prices could fall another $100 or $200, Kingsview’s Zeman said. “Long term, I’m still positive on gold. Fiscal irresponsibility is here to stay” and inflation concerns have been creeping up, he added.

Markets are waiting to hear from Federal Reserve Chairman Ben Bernanke, who is scheduled to speak at a gathering of central bankers in Jackson Hole, Wyo., on Friday.

Expectations are growing that Bernanke won’t unveil more stimuli, which have also contributed to gold’s fall.

At last year’s gathering, Bernanke announced a second round of quantitative easing. Any indication of a similar program is likely to be beneficial for gold.

Meanwhile, silver tracked gold lower, with the September contract SI1U down $3.13, or 7.4%, to $39.16 an ounce.

Copper bucked the negative trend. The metal’s September contract HG1U added less than 1 cent, or 0.1%, to $4 a pound.

Platinum and palladium followed silver and gold, with October platinum PL1V off $53.80, or 2.9%, to $1,826.30 an ounce. September palladium PA1U declined $21.25, or 2.8%, to $743.15 an ounce.