Gold settled almost 2 percent lower on Wednesday, the biggest daily drop since its historic decline in mid-April, as investors sold off a range of commodities.
Silver dropped 4 percent and platinum group metals fell around 2 percent, tracking sharp losses in industrial commodities led by crude oil and copper.
Signs of slowing manufacturing growth both in the United States and China weighed down on demand hopes for industrial commodities and hit gold's inflation-hedge appeal.
Still, bullion has recovered more than half the $225-per-ounce loss it incurred between April 12 and 16, driven by strong physical demand around the world especially in top bullion consumers China and India.
"Some of those out-of-control retail buying has now been satisfied,'' said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC.
Physical buying also slowed down due to holidays in China and parts of Europe due to the Labor Day holiday.