Gold hit its lowest since early February on Thursday after the Federal Reserve sounded an unexpectedly hawkish note on U.S. interest rates, sparking a surge in Treasury yields and sending the dollar to a 14-year high.
Spot gold hit a 10-1/2 month low of $1,132.15 an ounce, and was down 1.2 percent at $1,129.62 an ounce by 3:11 p.m. EDT.
U.S. gold futures for February delivery settled at $1,129.80 an ounce.
Lifting the federal funds rate to a 0.50-0.75 percent range on Wednesday, the U.S. central bank flagged a faster pace of hikes next year as it geared up for the incoming Trump administration's pledges to cut taxes and boost spending.
That sparked a rally in the dollar, pressuring assets priced in the currency, while U.S. Treasury yields soared, lifting the opportunity cost of holding non-yielding gold.
"The Fed was more hawkish than expected, which re-started this dollar rally," ABN Amro analyst Georgette Boele said. "With yields rising in the United States and the dollar massively up, that's the worst possible combination for gold."
The metal had already fallen sharply in the run-up to the Fed meeting after Republican candidate Donald Trump's election to the U.S. presidency sparked a rally in the dollar and a rise in assets seen as higher risk, like stocks, at gold's expense.
The metal saw its biggest monthly drop since mid-2013 in November, and is down 10 percent since the election.
Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, are down about 10 percent from mid-November. Holdings fell again on Wednesday, by 6.8 tonnes.
"The sell-off in ETFs is the result of lack of investor appetite in the gold markets," ANZ analyst Daniel Hynes said. "The weak physical markets in China and India are not really helping gold."
Indian demand has suffered from a cash crunch in recent weeks after officials suspended the use of some bank notes, while Chinese traders say the People's Bank of China has limited imports into the world's biggest gold market.
Palladium, bucking the trend among the major precious metals, was up 0.4 percent at $722.50. The white metal is mainly used in autocatalysts, and tends to be more broadly correlated to other cyclical assets than gold, silver and platinum.