Gold settled more than 2 percent lower on Tuesday, hit by technical selling below its key 200-day moving average and as investors cashed in after its sharp rally on hopes that the Federal Reserve would not raise interest rates any time soon.
Selling accelerated sharply after gold prices broke through their 200-day moving average at $1,300 an ounce, a key level where many investors had placed their stop-loss orders.
for June delivery settled 2.1 percent lower at $1,300.30 an ounce, logging its biggest one-day drop since since December 19.
Earlier, spot gold hit a low of $1,290.34 an ounce. It was last down 1.8 percent at $1,302 an ounce.
Traders said the yellow metal's recent short-covering rally, after the Fed's March meeting minutes last week showed officials were not keen on increasing interest rates straight after unwinding bond purchases, was susceptible to a sell-off.
"Gold was hit by profit-taking as the rally to $1,330 on Fed minutes appeared overdone. The break below 200-day moving average and $1,300 level also triggered tons of sell-stops," said Thomas Capalbo, precious metals trader at brokerage Newedge.
Traders said that gold prices were also weighed down by Monday's gains in the S&P 500 index and encouraging U.S. retail sales data.
On charts, gold prices plunged by nearly $10 an ounce in the few minutes after the $1,300 level gave way. The metal had held above the key level in the past four sessions.
Read MoreChina's gold fever to cool in 2014
In physical-market news, Chinese firms may have locked up as much as 1,000 tonnes of gold in financing deals, a report from the World Gold Council said, indicating that a big slice of imports had been used to raise funds due to China's tight credit conditions rather than to meet consumer demand.
The financing-related buying in the world's top gold consumer means prices could come under pressure if imports are hit by a broader crackdown on using commodities for finance.
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