The bank also decided to cut back bond purchases, a widely expected move that was factored into gold prices and the dollar, and the extension of the bond-buying program took the wind out of the euro's rally against the dollar.
European stock markets gained following the decision as investors started to price out future rate increases, moving away from safe-haven gold and bonds and into stocks and other assets perceived as risky.
A strong greenback makes dollar-priced gold costlier for non-U.S. investors. "Stocks are at extremely high levels in the U.S., but I think Europe is going to start playing catch-up," said Forex.com analyst Fawad Razaqzada. "I'm bearish on gold while we remain below $1,300."
Spot gold was down 0.79 percent at $1,266.90 an ounce. U.S. gold futures for December delivery settled down $9.40, or 0.7 percent, at $1,269.60 per ounce.