The gold-price rout began taking shape in the early morning hours Monday, after a sharp Friday selloff in a market that had risen steadily for a decade left traders girding for a downdraft.

Some in London began arriving at work Sunday night ahead of the market's Asia opening to prepare for the onslaught, while others arrived as early as 4 a.m. Monday, even though a paucity of traders at this time limits most trading options until about 8 a.m.

At trading desks at banks and hedge funds, some feared that a major capitulation was coming, one trader said, referring to the condition in which recent buyers sell rather than hold on to losing positions. Trading swings picked up following a plan last week for the financially stressed nation of Cyprus to sell gold, a recommendation by Goldman Sachs Group Inc. to bet against the metal, and signs that Federal Reserve members were considering easing up on their support for financial markets.

Then the traders saw the latest deteriorating economic data, a softer-than-expected first-quarter growth number from China. Markets opened with furious trading and deeper declines, as some investors sought the safety of puts, options that protect the holder by conferring the right to sell at a prearranged price, which potentially added to selling pressure in the market.

The plunge left traders and investors nursing billions of dollars in losses, with the decline in the futures market alone amounting to $9.3 billion between Thursday and Monday.

'Every time you thought, 'That has to be enough,' it wasn't,' said David Govett, manager of the precious-metals department at Marex Spectron, one of the London Metal Exchange's biggest brokers.

Gold's 13% decline over two days marks a potentially historic reversal for an investment that gained wide acceptance after gains of more than 500% over a dozen years. The metal, after being embraced by the masses as a way to generate outsize returns with less volatility, now joins the stock, bond and real-estate markets as being widely viewed as offering both potential rewards and significant risks. Gold recovered a bit on Tuesday, with the June contract rising $26.30, or 1.9%, to $1,387.40.

Some traders said institutional selling was concentrated on Friday, when prices dropped 4%, and selling by individual investors on Monday, with a 9.4% tumble. 'Friday was more of a block liquidation,'said Seb Ridd, head of Delta 1 trading at Citigroup Inc., C +3.99% who noted the selling of large positions as well as selling triggered by stop-loss orders, in which shares are unloaded after falling through preset thresholds.

With trading nearly all electronic, the atmosphere was quiet but intense. Vedant Mimani, 38 years old, lead portfolio manager at hedge fund Atyant Capital, started checking up on gold prices from his Miami home well before Asian markets opened on Sunday night. Mr. Mimani's $80 million fund has been bearish on gold since the fourth quarter of 2011, he said.

'What I was concerned about over the weekend was that it was just going to be a slow bleed from $1,400 to $1,200, and that $200 drop would take over the course of a month,' he said.

Instead, when he checked the market on his iPhone at 7.30 a.m. on Monday, gold prices were down more than $100 a troy ounce.

The sheer swiftness of gold's decline on Monday meant that investors were willing to pay a premium for put options on gold and silver-backed exchange-traded funds, a centerpiece of his strategy. His fund sold its holdings.

'We didn't think it would unravel so quickly,' he said.

Trading volumes in gold exchange-traded funds, a favorite among individual investors, surged over the two-day swoon. On Friday, shares of the SPDR Gold Shares exchange-traded fund, the world's largest gold ETF, turned over at a rate more than five times the daily average; on Monday, more than 90 million shares of the fund changed hands, shattering the previous record of 79 million in 2009.

In hindsight, the sparks of gold's plunge were flickering last week, with the Fed minutes and the Goldman sell recommendation. Those factors helped weigh on an asset that, in the view of some market participants, had gone too far.

Mr. Govett and others said a key moment on Friday was when the price fell through $1,530 midmorning New York time. That was where a lot of traders had 'stop-loss' orders to sell, and sell they did. The price quickly slumped another $25.

'There was just an avalanche of stop-loss selling,' said Steve Murton, head of precious metals at Triland Metals, a brokerage firm in London. 'The volume was huge.'

Soon after markets reopened Monday morning in Asia, which is late Sunday in London, the selling resumed after the soft Chinese economic data. Asian buyers had helped boost gold in the past. If they weren't interested, who would be?

After the whirlwind, Mr. Mimani said he is taking a more bullish view on gold, especially gold mining stocks, because their dividend payouts now offer a yield of about 4%.