Spot gold erases its YTD gains after the Federal Reserve said it would soon be appropriate to raise interest rates, and Fed Chair Jerome Powell said officials are "of a mind" to raise rates at the March 15-16 meeting.
The dollar and benchmark U.S. Treasury yields rose following Powell's comments, curbing demand for non-interest bearing bullion.
"There is downside risk to gold, now that much of the policy ambiguities are gone," TD Securities head of commodity strategy Bart Melek says, according to Bloomberg.
"While physical and ETF demand has remained strong, Powell's hawkish comments seem likely to have put a cap on gold around $1,850 in the short term," precious metals trader Tai Wong tells CNBC.
February Comex gold (XAUUSD:CUR) settled -1.2% at $1,829.70/oz., the lowest finish since January 18, and has dropped as low as $1,815.80 in electronic trading.
ETFs: GLD, IAU, NUGT, PHYS, GDX, PPLT, PALL, SPPP, PLTM, PGM, PTM
Meanwhile, Comex palladium (XPDUSD:CUR) closed +7.4% to $2,350.60/oz., the highest finish for a most-active contract since September 7, and platinum (XPTUSD:CUR) ended +0.8% to $1,033.72.
Since Russia is a key producer of both metals, a conflict with Ukraine could cause supply disruptions that tighten the market.
Gold closed yesterday at $1,852.50/oz., the highest settlement for a most-active contract since November 18.