Gold fell to a six-week low on Thursday as the dollar rose to a two-week high on expectations that the US Federal Reserve may raise interest rates as early as June.
Spot gold fell 0.3 per cent to $1,234.52 per ounce by 0724 GMT, after hitting its lowest since March 21 at $1,232.60 earlier in the session.
It fell 1.5 per cent on Wednesday - its worst single-day drop since November 23 - breaching both its 50-day and 200-day moving averages.
US gold futures fell more than 1 per cent to $1,235.40 an ounce.
The dollar index , which measures the greenback against a basket of currencies, was up 0.2 per cent at 99.400 on Thursday, after touching a two-week high of 99.462.
“With the safe-haven premium coming off gold, there was enough to break the camel's back. Any small rallies are going to get sold and gold is set for a deeper correction towards the $1,200 level,” said Jeffrey Halley, senior market analyst at OANDA.
The US Federal Reserve kept interest rates unchanged on Wednesday, downplaying weak first-quarter economic growth while emphasising the strength of the labour market, signalling it was still on track for two more rate rises this year.
“The price action in gold since mid-April has been technically bearish. The Fed has basically put the ship back on course with regard to their intentions to continue hiking rates,” said Halley.
Higher rates would reduce the demand for non-interest bearing gold and would also make the dollar-denominated metal more expensive for buyers paying with other currencies.
Investors will now focus on Friday's monthly US non-farm payrolls report for further clues on the Fed's likely rate hike trajectory.
Economists polled by Reuters expect US employers to have added 185,000 jobs in April, up from 98,000 in March.
“It seems like the decline (in precious metals) could continue somewhat further,” INTL FCStone analyst Edward Meir said.
“However, we do expect a period of consolidation to set in fairly shortly and do not see a substantial drop below the $1,200 level for gold anytime soon.”
Spot silver rose 0.2 per cent to $16.42, after hitting a near four-month low of $16.37 on Wednesday. The grey metal has fallen over 12 per cent since touching a 5-month high of $18.65 in mid April.
Platinum was up 0.4 per cent at $896.15. The metal clung to its previous session low of $890.50, a level not seen since late December. Palladium fell 0.2 per cent to $797.50, extending its nearly 2 per cent drop from the previous session