Gold prices retreated on Thursday from the record highs they hit in the previous session as the dollar rose ahead of policy decisions from the UK and the euro zone, which curbed appetite for assets seen as higher risk.
The precious metal reached a high of $1,097.25 an ounce on Wednesday after a pledge from the U.S. Federal Reserve to keep interest rates low knocked the dollar. But the currency bounced back, diminishing interest in gold as an alternative asset.
Spot gold was bid at $1,090.10 an ounce at 1024 GMT (5:24 a.m. EST), against $1,092.35 late in New York on Wednesday. U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange rose $3.40 to $1,090.70 an ounce.
The fact that we didn't manage to go through $1,100 might lead some investors to reconsider their positioning in the sector, said Commerzbank analyst Eugen Weinberg.
Should the dollar become stronger over the coming days I would expect to see more profit taking, he added.
If the ECB provides some impulses on euro-dollar, it might be the thing to take us to the next step, but I think more probably we will see a prolonged correction right now, because the trend of the last few weeks is becoming a bit too pronounced.
The dollar gained broadly, paring earlier losses after the Federal Reserve pledged to keep interest rates low, as investors turned cautious before policy decisions from the Bank of England and European Central Bank.
The BoE will announce its decision at 1200 GMT (7 a.m. EST), with the market bracing for a possible further increase in asset purchases, while an ECB decision and news conference follow at 1245 GMT (7:45 a.m. EST)and 1330 GMT (8:30 a.m. EST).
Speculation continued over the prospect of further central bank gold acquisitions, after India's purchase of 200 tonnes of bullion from the International Monetary Fund on Monday. The report helped push gold to record highs.
Sri Lanka's central bank said it had been buying gold for the last five or six months as it diversifies its reserves amid volatile markets.
A former adviser to the People's Bank of China poured cold water on the idea that the PBC will buy IMF gold, saying locally-sourced bullion would be cheaper.
In the physical market, gold traders in India, the world's biggest bullion consumer last year, reported poor demand as high prices put off buyers.
Demand continues to be slack even though we were running at a discount of 150 (rupees per 10 grams), said Pinakin Vyas, chief manager-treasury at IndusInd Bank in Mumbai. I have advance orders at about $1,050 (an ounce).
Among other precious metals, spot silver was bid at $17.40 an ounce against $17.44. Holdings of the world's biggest silver-backed exchange-traded fund, the iShares Silver Trust, fell 3.85 tonnes on Wednesday.
Platinum was at $1,357 an ounce against $1,364, while palladium was at $328.50 against $327. The metals, both of which are primarily used in autocatalysts, are both sensitive to car demand.
Toyota Motor Corp, the world's biggest carmaker by sales, halved its annual loss forecast but failed to convince investors it is back on track, as government subsidies peter out and a strong yen takes its toll.
(Reporting by Jan Harvey; Editing by William Hardy)