Gold fell as much as 4 percent Wednesday as investors pulled money from the safe-haven, putting some of it in stock markets, after a court ruling aiding Germany's participation in euro zone bailouts.
Both the spot price of gold and U.S. gold futures broke below $1,800 an ounce as investors sold more of the precious metal the day after it hit a record high above $1,920.
Stocks on Wall Street jumped 2 percent, rallying with shares on other major exchanges, after Germany's top court rejected lawsuits aimed at blocking Berlin's involvement in emergency loan packages. Chancellor Angela Merkel called the ruling a validation of her euro zone policy.
"I think it's a pretty valid assumption that people are selling gold and buying stocks today, with the stock market rallying on news that Germany might participate more actively in the Greek bailout plan," said Adam Klopfenstein, metals strategist at Lind-Waldock in Chicago.
"We're seeing the flight-to-quality theme in gold fading in the near-term, but I do think the long-term buyers and holders of gold haven't changed their thesis yet. What we're seeing are just corrections in a bull market. In three days, people who didn't buy in the break below $1,800 might just regret it."
By 1:35 p.m. EDT, spot gold was at $1,815.39 an ounce, after falling to an intraday low of $1,793.19 from a high of $1,880.11. In the previous session, it hit all-time peak of $1,920.30 before settling New York trade at $1,872.90.
In futures trading, U.S. gold for delivery in December was at $1,817.00 an ounce, moving between $1,883.20 and $1,793.80. It finished Wednesday's trade at $1,873.30.
Among other precious metals, silver was down about 1 percent at below $42 an ounce and spot platinum was down 1.7 percent at under $1,820 an ounce.
Fears that lack of support from Germany and other economic powers would scuttle the bailout of debt-saddled European countries has helped fuel gold's rally of as much as 35 percent this year at Tuesday's record high.
Thursday's swing of more than $80 was the most volatile seen in gold in almost two weeks. In late August, bullion moved more than $100 at times between session peaks and troughs.
On Tuesday, gold rallied to a record high after the Swiss National Bank's surprise move to peg its currency to the euro to prevent gains in the Swiss franc from damaging the country's economy.
Profit-taking began soon after gold breached $1,920 in that session, but analysts said gold was still in a position to rally as the Swiss intervention could be emulated by other central banks wanting to safeguard their currencies from excessive appreciation.
© 2017 Thomson/Reuters. All rights reserved.