Gold slumped over 2% in volatile trading on Thursday as the U.S. dollar and Treasury yields rose after Federal Reserve Chair Jerome Powell shifted the central bank's inflation target in a widely expected move.
Spot gold fell 1.5% to $1,925.19 per ounce. Prices had risen as much as 1.1% during Powell's speech.
U.S. gold futures were down 1.4% at $1,924.60 per ounce.
The Fed saying it will allow modest overshoot in inflation is very positive for gold, said Daniel Ghali, commodity strategist at TD Securities, "But the market already anticipated that so there is no new impetus to buy gold."
The U.S. central bank rolled out an aggressive new strategy to lift employment and will seek to achieve inflation averaging 2% over time, offsetting below-2% periods with higher inflation "for some time."
Weighing on bullion, the U.S. dollar gained against key rivals, while longer-term U.S. Treasury yields moved to their highest levels in months.
"Powell's speech sparked a roller coaster ride for asset markets especially gold, which rallied nearly $50 but completely reversed as market realized he didn't provide any surprises that hadn't been mooted earlier," said Tai Wong, head of base and precious metals derivatives trading at BMO.
The Fed had pumped in massive stimulus and kept interest rates near zero to lift the U.S. economy from the impact of the coronavirus, which has also weighed on the labour market as new claims for unemployment hovered around 1 million last week.
Elsewhere, silver fell over 3% from a one-week high earlier in the session. The metal was down 2.1% at $26.95.
Spot palladium was down 1.4% to $2,166.33 per ounce and platinum fell 1.1% to $918.54.