Gold held near its weakest level in almost a week on Thursday, after declines in holdings of exchange-traded funds, equities and other commodities overshadowed the U.S. Federal Reserve's decision to maintain its loose monetary policy.
Although the Fed's money-printing to buy assets could stoke inflation, gold has been overwhelmed by fears of sales by central banks and daily outflows on global bullion ETFs, sending holdings to their lowest since their lowest since September 2009.
Gold fell $2.93 an ounce to $1,453.81 by 0348 GMT, having shed more than 1 percent in the previous session -- its biggest daily drop since bullion's historic decline in mid-April. It hit a low of $1,439.74 on Wednesday, the weakest since April 25.
Prices dropped $225 an ounce between April 12 and 16 on fears of a withdrawal of the Fed's monetary stimulus and after the European Central Bank and the International Monetary Fund asked Cyprus to sell reserves as part of a bailout deal.
"People are more wary as gold has been trading within the same trading band. Moreover, Europe has agreed on a loan deal for Cyprus, and one of the terms state that assets in gold might be sold," said Brian Lan, managing director of GoldSilver Central Pte Ltd in Singapore.
"But this is unlikely to be sold on the open market. I believe another central bank will be buying it. China's physical demand is still strong. This morning they are most probably keeping a lookout to see where the market is going before purchasing."
U.S. gold for June delivery stood at $1,453.40 an ounce, up $7.20.
In its statement following a two-day meeting, the Fed reiterated it would continue to buy $85 billion worth of bonds each month to support a moderately expanding economy that still has too high an unemployment rate.
But instead of rallying on the news, gold tracked other markets lower on renewed worries over the Chinese and U.S. economies after the latest economic data from both countries raised doubts about the strength of the global economy.
China's factory-sector growth eased in April as new export orders fell for the first time this year, a private survey showed on Thursday, suggesting the euro zone recession and sluggish U.S. demand may be risks to China's economic recovery.
Investors turn their attention to the closely watched non-farm payrolls report on Friday, which will signal the longer-term prospects for the Fed's monetary stimulus.
The U.S. economy is likely to have added 145,000 jobs. March's number fell far short of expectations at 88,000, triggering a sell-off in riskier assets.
Physical market activity slowed after a recent surge in the purchase of gold bars, coins and nuggets across Asia sent premiums for gold bars to multi-year highs.
Dealers expected second-largest consumer China to look for bargains as markets resumed trading after a three-day holiday, but the physical market in Hong Kong was easier than a week ago, as new supplies arrived.
"Supply is a bit better, because demand has also slowed down a little bit. Premiums for gold bars are still steady at $3 an ounce," said a dealer in Hong Kong, which is China's main source for gold imports.
Gold's historic sell-off last month has widened a disconnect between funds that sold on dissatisfaction over bullion's underperformance and individual investors who could not get enough physical gold coins and bars at bargain prices.
In other markets, growing doubts over the health of global economies pushed Asian shares lower on Thursday, adding to investor caution before a European Central Bank meeting that could see interest rates cut to support growth.