Gold fell on Thursday, snapping three sessions of gains as safe-haven buying subsided after successful European bond sales and a more positive economic outlook from U.S. Federal Reserve Chairman Ben Bernanke.
Silver fell 3.1 percent to $28.74 an ounce, tracking gold's decline.
Platinum and palladium hit multi-year highs on expectations of faster global growth, stable investment demand and optimism stemming from better demand from the auto industry. Prices later came off their peaks on profit-taking.
Bullion dropped as the euro posted its biggest rise against the dollar in more than six months after Spain and Italy staged successful bond sales, easing concerns about an escalation of euro zone debt strife.
The fact that the euro rallied should have supported gold, but it didn't because the reason for the rally was that the Spanish and Italian bond auction went well, which reduced the risk demand for gold, said James Steel, chief commodity analyst at HSBC.
Gold was further pressured after Bernanke said the U.S. economy should grow around 3 percent to 4 percent this year, a healthier clip than in 2010, but not enough to bring down unemployment as much as policymakers would like.
Spot gold fell 0.8 percent to $1,376.19 an ounce at 2:53 p.m. EST (1953 GMT). U.S. gold futures for February delivery settled up $1.20 at $1,387 an ounce.
Earlier in the session, gold rose toward $1,400 an ounce after data showed an unexpected jump in weekly U.S. jobless claims, their largest rise in six months. This lifted gold to a session peak of $1,392.80 an ounce, its highest since January 4.
But the short-covering rally ran out of steam and gold fell after three straight days of rallies, analysts said.
COMEX gold futures volume was more than one-third above its 30-day average, and silver was about 10 percent higher, preliminary Reuters data showed.
The euro zone's leaders are trying to come up with a new package of anti-crisis measures, which also dent gold buying. European Central Bank President Jean-Claude Trichet renewed a call for the bloc's governments to boost the size and scope of their 440 billion euro ($578.2 billion) rescue fund.
GFMS SEES GOLD ABOVE $1,600/OZ
Gold could rally to record highs above $1,600 an ounce late this year or early 2012 as safe-haven concerns fueled investment demand, respected metals consultancy GFMS Ltd said on Thursday.
The official sector swung into net purchases last year for the first time since 1988, as increased buying in emerging markets more than offset gold sales by European central banks, GFMS said.
GFMS Chairman Philip Klapwijk said the sovereign debt crisis in Europe could spread to the United States, as the world's largest economy has used loose monetary policy and massive budget deficits to stimulate economic recovery.
I think that at some point, this could start to call into question of its Triple-A bond rating, which would significantly buoy bullion's safe-haven buying, Klapwijk said.
Gold has risen nearly 1 percent this week due to jitters over euro zone debt, but remains nearly 3.5 percent below the record $1,430.95 struck in December.
Platinum and palladium have found renewed favor among investors as holdings in the larger ETFs remain near record levels, while optimism grows over the outlook for the auto market this year, a key source of demand for both metals.
Palladium, consumed primarily by gasoline-powered vehicles used largely in North America and emerging economies, virtually doubled in price last year as investors prepared for car markets in countries like China, Brazil and India to grow.
Spot palladium eased 0.1 percent to $807.47 an ounce, having hit a 10-year high of $821.47 earlier in the day.
Platinum rose 0.5 percent to $1,807.24, having earlier reached its highest since July 2008 at $1,826.74.