Sept. 26, 2011, 2:46 p.m. EDT

Gold at lowest in two months as cash is king

SAN FRANCISCO (MarketWatch) — Gold futures on Monday ended at their lowest since late July, adding to last week’s dramatic drops as investors hedged against a possible global liquidity crunch and reacted to increases in margin requirements for gold.

Gold for December delivery /quotes/zigman/661658 GC1Z -2.00% declined $45, or 2.7%, to end at $1,594.80 an ounce on the Comex division of the New York Mercantile Exchange, the lowest settlement since July 21.

Silver, which had wavered between gains and losses earlier, closed lower, with the December contract /quotes/zigman/663010 SI1Z -0.20% off 13 cents, or 0.4%, to settle at $29.98 an ounce, the lowest finish for silver since Feb. 7.

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“Short term, there’s clear demand destruction in gold derivatives right now,â€