Gold took another beating on Thursday, falling close to a three-year low after Federal Reserve Chairman Ben Bernanke's comments on Wednesday that bond buying could be slowed later this year.
Investors dumped the precious metal, which traded as low as $1,289 per ounce as the dollar made hefty gains against most major currencies including the yen, with the Indian rupee hitting a fresh record low of 60 rupees against the greenback.
UBS cut its 2013 gold price forecast by 10 percent on Thursday to $1,440 from $1,600 because of Bernanke's comments.
"One of the key changes for gold investors is the confirmation that as far as the Fed is concerned the stimulus program is finite," Ric Spooner, chief market analyst for CMC Markets, told CNBC.
"The chances are that gold has further to go on the downside from here," he said, forecasting that gold will fall into the $1150-$1300 territory in the coming months.
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Gold has declined almost 17 percent since mid-April driven by a benign global inflationary environment, which has lessened the appeal of the metal as a hedge against rising prices.
The Fed concluded its two-day policy meeting on Wednesday and at his press conference, Bernanke set the stage for a normalization of its ultra-loose monetary policy that has supported gold in recent years.
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Trevor Greetham, asset allocation director at Fidelity Worldwide Investment said the the strength of the US dollar despite a further drop in risk assets was the most noteworthy thing about the initial market reaction to the Fed's meeting.
"This suggests the counter-intuitive dollar weakness we have seen since Fed tapering was first raised has run its course and was mostly likely a temporary phenomenon related to the selling of dollar-linked assets in the emerging markets," he said.
Greetham plans to stay overweight the U.S. dollar and will further deepen his underweight positions in bonds and dollar-sensitive commodities including gold, which is "off hard today."
Bernanke added that Fed asset purchases could end in mid-2014, if economic data aligned with the central bank's expectations, providing more clarity to markets that have been uncertain about the timeline for tapering.