Gold fell around 2 percent on Thursday, its biggest one-day drop in more than a month, as a pullback in the U.S. Federal Reserve's stimulus program and an equities rally on robust U.S. growth data prompted bullion investors to take profits.
Signs of stabilization after a sharp emerging market selloff, which had boosted gold prices earlier this week, also hit gold's safe-haven appeal. Silver and platinum group metals dropped on gold's coattails.
The U.S. dollar strengthened and the S&P 500 stock market index rose more than 1 percent after data showed that robust household spending and rising exports sparked a 3.2 percent annual rate growth in the U.S. economy in the fourth quarter.
"The broad markets are quite volatile right now, so I wouldn't over interpret too much about short-term actions into a long-term trend for the gold market," said Axel Merk, portfolio manager at California-based Merk Funds, which has about $400 million in currency mutual-fund assets.
Spot gold was down 1.8 percent at $1,244.60 an ounce by 2:29 p.m. EST. U.S. COMEX gold futures for February delivery settled down $20 an ounce at $1,242.20, with trading volume about 10 percent above the 250-day average, preliminary Reuters data showed.
On Wednesday, gold rose as U.S. equities initially dropped after the Fed announced a further $10 billion reduction in its monthly bond-buying program. Gold was also pressured as Latin American stocks, and currencies gained and Russia's ruble and Turkey's lira rebounded, after policymakers pledged to take any necessary measures to stabilize their markets, though investors worried the respite would be short-lived.
Despite Thursday's pullback, gold was still 3 percent higher year to date. Bullion had benefited from losses in equities after bullion's 28 percent drop and a record rally in U.S. stocks last year.
"Investors always need to be mindful that gold can experience extraordinary drawdowns, and generate extreme volatility," Jonathan Lewis, chief investment officer at New York-based Samson Capital Advisors, told the Reuters Global Market Forum on Thursday.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, had a rare inflow of fresh investment on Wednesday. Holdings increased by 2.1 tons to 792.56 tons, though that figure is still near a five-year low.
In other precious metals, platinum fell 2 percent to $1,379.49 an ounce, tracking losses in gold. The metal drew little support from news that South Africa's AMCU union had rejected a 9 percent wage offer from leading platinum producers. Silver fell 2.7 percent to $19.20 an ounce, and palladium was down 0.9 percent at $705.75 an ounce.
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