Spot gold was down 4 percent at $1,294 an ounce, while U.S. gold futures were down 6 percent at $1,294 an ounce.
"Precious metals, in particular gold and silver, are losing their status as a viable asset class to hold," said Viktor Nossek, head of research at Boost ETP. "The macroeconomic backdrop shows that the U.S. is recovering, Europe is restructuring and China is rebalancing."
He added, "Risk assets further out probably have more appeal because they have an underlying income stream that backs them up. Investors are pre-empting the view of global stabilization by selling precious metals."
(Read More: Fed Hints at Taper, Markets Swoon in Anticipation)
The ultra-loose monetary policy brought in by the Fed to boost U.S. growth, which kept interest rates at rock bottom levels while stoking concerns about inflation, was a major factor fueling a more than decade-long bull run in gold.
Indications that the policy was nearing an end have helped push prices down more than 20 percent this year after 12 straight years of gains. Gold is now firmly in bear market territory, more than 30 percent below its record high of $1,920.30 an ounce, set in September 2011.
"There's always been an expectation that there's inflation lurking around the corner with QE being instigated by the West, but it has never materialized," Nossek said. "The idea of pent-up inflation is not only dissipating, but is nowhere to be seen."