Gold slid more than 1 percent to a three-week low on Thursday, extending the previous day's decline, after minutes from the Federal Reserve's April policy meeting signaled that it could raise U.S. interest rates as soon as next month.
Downward pressure briefly increased after U.S. data showed the number of Americans filing for unemployment aid fell last week, the latest sign that the economy was regaining speed after stumbling in the first quarter. That lifted the dollar.
was down 0.3 percent at $1,253.80 an ounce at, off an earlier low of $1,244.00, its weakest since April 28. It fell 1.7 percent on Wednesday.
U.S. gold futures for June delivery settled down 1.5 percent at $1,254.80 an ounce. The latest Fed minutes indicated that the U.S. central bank is likely to raise rates if data points to stronger second-quarter growth as well as firming inflation and employment.
"All commodities are getting hammered - silver is down 3 percent, oil down more than 2 percent," Commerzbank analyst Carsten Fritsch said. "It seems that a lot of speculative investments are being unwound, with the stronger U.S. dollar as excuse."
Gold is highly sensitive to interest rate hikes, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced. The metal has risen nearly 20 percent this year on speculation the Fed will hold off from further increases on concerns over volatility in global markets. Messages from the bank on the issue have been mixed.
"Gold and silver prices have taken a big plunge on the back of falling bond prices and rallying U.S. dollar since the release of the FOMC's last policy meeting minutes ... and the accompanying hawkish commentary from several Fed officials," said Fawad Razaqzada, technical analyst for Forex.com and City Index. "This basically has diminished the appetite for low and non-interest-bearing assets like the euro and gold respectively."
Fed Vice Chairman Stanley Fischer said on Thursday the United States requires faster potential economic growth in order to lift the long-run equilibrium interest rate.
Appetite for gold overnight in Asia, home of the world's biggest bullion markets, was soft.
"Bargain-hunting kept gold buoyant during early Asian trade today. However, weakness soon returned," MKS said in a note.
Among other precious metals, silver was down 2.2 percent at $16.47 an ounce, platinum was down 1.3 percent to $1,011.3 and palladium was down 2.1 percent at $558.90.