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Gold tumbles 2% as Fed comments feed dollar gains

Spot gold fell about two percent on Wednesday, one of its deepest declines of the past year, as the dollar strengthened following hawkish comments by Federal Reserve officials on the path of U.S. interest rates.

Bullion tumbled to its lowest in a month, reversing the gains made the previous day when investors sought "safe haven" assets after deadly bomb attacks on Brussels.

Spot gold fell 2.25 percent to trade at around $1,219.97 an ounce after earlier dropping as much as 2.6 percent, also pressured by investors booking profits ahead of the Easter break, which starts on Friday.

U.S. gold futures settled down 2 percent at $1,224 an ounce, only the sixth time in 12 months that the most-active contract has fallen that much in a single trading session. They last traded down 2.25 percent at $1,220.50.

Gold mining companies fell in sympathy, as a fund tracking the industry fell 7.5 percent.

"The market rejigged its outlook after comments from the Fed hinted a rate hike could come in April or in June," said Bart Melek, head of commodity strategy for TD Securities in Toronto.

Uncertainty in the global markets including events such as 'Brexit' or Britain's decision to stay in or leave the European Union, could trigger more safe haven buying for gold over the coming weeks, he said.

Comments from several U.S. Federal Reserve officials underpinned the dollar, which touched a one-week high, rising 0.5 percent against a basket of currencies.

Philadelphia Fed President Patrick Harker said the central bank should consider another hike as early as next month if the U.S. economy continues to improve, while Chicago Fed President Charles Evans also said he expects two more rate increases this year.

St. Louis Fed President James Bullard said on Wednesday that inflation expectations were stabilizing, calling it a "hopeful sign."

"If there was a massive rate hike and a jump in the dollar, it would be very difficult for gold to move higher, but any rate increase will be gradual," ABN Amro Georgette Boele said.

Higher interest rates increase the holding costs of gold, which is a non-interest bearing asset.

Citi analysts said in a note that rising investor and policymaker confidence in the global economy heading into the second half of the year is likely to pressure demand for gold as a safe haven.

Bullion has rallied 16 percent this year, regaining its role as a shelter for risk-averse investors, in the face of tumbling equities and fears of a global economic slowdown.

Silver futures fell 4 percent to $15.25 an ounce, platinum futures dropped 3.9 percent to a one-week low of $958.30 an ounce and palladium futures also dipped 3.86 percent to a near one-week low of $582.25 an ounce.

— CNBC's Gina Francolla contributed to this report.