Gold futures fell to a three-week low after the dollar extended gains against the euro and falling oil prices eroded the appeal of the precious metal as an alternative investment.
Gold for June delivery dropped $19.60 to end at $889.40 an ounce on the New York Mercantile Exchange. Earlier, the price touched $885.40, the lowest since April 2.
The precious metal lost $16.20 to close at $909 an ounce on Wednesday.
A day of heavy losses derailed gold further off the bull track as the U.S. dollar took a sizeable leap against the euro and as oil prices eased significantly, said Jon Nadler, senior analyst at Kitco Bullion Dealers.
Gold investors are also beginning to see several pivot points taking shape in currencies, the credit crisis, and the official sectors thus far only verbal commitment to stability, and they are lightening up on metals positions as a result.
The euro dropped as much as 2.4 percent from a record $1.6019 on April 22 amid speculation the U.S. Federal Reserve may slow the pace of interest-rate cuts.
The dollar index, which measures the U.S. currency against a basket of major currencies, gained 1.2 percent to 72.65.
The Fed cut borrowing costs 3 percentage points to 2.25 percent from Sept. 18 to March 18. During that period, Gold jumped 39 percent while the euro gained 12 percent.
Interest-rate futures show an 82 percent chance the Fed will lower the benchmark rate to 2 percent by April 30.
Meanwhile, crude-oil futures also fell sharply, pressured by the rally in the dollar. Oil was recently down $2.70 or 2.3 percent to $115.60.
Also on the Nymex, July platinum futures dropped $48.10 to close at $1,970.70 an ounce.
May silver futures lost 50 cents to finish at $16.66 an ounce. May copper edged down 2 cents to $3.88 a pound.
June palladium lost $1.10 to close at $446.45 an ounce.