Gold rose Thursday, reversing a three-day plunge that left prices beneath their critical 200-day moving average.

This week's plunge was severe. Last Friday, the most actively traded contract on the Comex closed at $1,711.50, but by the end of this Wednesday's trading it had fallen to $1,643.20. The yellow metal's 200-day moving average is about $1,681.

Wednesday's trading was particularly dramatic.

Substantial liquidation on the Asian markets set the gold market up for heavy losses, following declines earlier in the week, James Steel of HSBC wrote in a note Thursday. Later in the trading session, selling primarily on the listed futures and options exchanges drove gold even lower, and its price penetrated the $1,650 per troy ounce level as US bond yields jumped and the euro dropped.

UBS analyst Edel Tully said in a note Thursday that besides liquidation, gold fell on fresh shorts.

It's clear that the market trend right now is an unwinding of safe-haven exposures, like gold, and a preference for growth assets, she wrote.

Gold has not just been falling this week. Since Feb. 28 prices on the Comex have fallen 8 percent.

The big drop in recent weeks reflected a surging dollar and a falling euro. The cheaper the euro the less expensive it is for gold buyers who do not use dollars to purchase the metal.

The reason for the stronger dollar, and thus the weaker euro, has been increasing evidence that the U.S. economy is on a sustainable trajectory to real recovery. The U.S. stock market has been rallying, with the Nasdaq Composite closing above 3,000 for the second time since 2000.

But Thursday the slide appeared to have paused, if not halted. In morning trading Thursday gold was up a few dollars to $1,646.

The recently reduced price for gold led to some physical buying Thursday, particularly from India.

Prospects for further declines depend on the outlook for the U.S. economy.

Further downside is likely ahead if the view intensifies that a (U.S.) growth story is sustainable, (bond) yields are rising, quantitative easing is redundant and a stronger dollar isn't going away, Tully wrote. Gold's attempts at an upside rebound hinges on doubts about this sustainability, particularly for Asia and Europe; when will European debt issues return to the fore again and inflation concerns.

Steel said he believes any further gold price declines will be moderate.

We reiterate our point that expectations of additional monetary easing have built up a price premium in gold, which now is being wrung out of the market, he wrote.

In early afternoon trading, spot gold was selling for about $1,660.