Gold tumbled from record highs in volatile trade on Thursday as deepening losses on Wall Street prompted investors to sell the metal and cover losses amid increasing margin calls outside of the commodity sector.
Bullion fell 0.5 percent after rallying in early trade to its third record in four days.
The early rise was fueled by safe-haven buying due to government currency interventions and expectations that central banks in Europe and the United States will renew monetary easing. But the rally fizzled as Wall Street's losses accelerated. Major U.S. stock indexes tumbled 3 percent amid an increasingly bleak economic outlook, as investors braced for possible bad news from Friday's U.S. payroll report.
Even as technical indicators showed the gold market was in overbought territory, most analysts said any pullback would be short-lived because there was enough safe-haven buying and economic fears to put a floor on prices.
"The only thing that would stop the momentum in gold at this point is an increase in margins. I bet that's coming sooner or later," said independent investor Dennis Gartman.
There was market chatter about an increase in margins for gold futures. The CME Group, which runs the U.S. futures market, has not made any announcement about a margin hike.
Gold hit a record $1,681.67 an ounce, and was down 0.3 percent at $1,655.29 an ounce. Bullion also hit all-time highs in euro, sterling and yen earlier in the session.
Gold option volatility also spiked more than 10 percent.
(Additional reporting by Melanie Burton in London; Editing by David Gregorio)