Gold prices tumbled below the psychologically significant $1,700 level Monday as fears that neither the U.S. nor Europe appear able to make progress on their sovereign debt problems drove investors to the dollar.

Stocks in Europe plunged. France's CAC 40 and Germany's DAX closed down more than three percent. In the U.S. the Dow Jones Industrial Average was down 2.6 percent, the Nasdaq Composite fell 2.5 percent and the S&P 500 tumbled 2.3 percent.

Meantime, the dollar soared to a six-week high.

Gold in midday trading fell to $1,690.86 on the spot market and was off $30 to $1,695.10 on the Comex.

I am surprised at the extent to which (the gold price) has pulled back. It seems as though all the safe-haven buying is being channeled into dollar and Treasuries at the moment, bypassing gold, said William Adams, head of research for FastMarkets.com.

The big decline comes despite continued strong investment demand, he said.

It's interesting to see the data from the CFTC and exchange-traded funds, which are showing that the investment side of market seems to be bullish.

Adams sees the technical support at the $1,680 or $1,675 level.