Gold rose more than 3% today after physical buyers of bullion grabbed the chance offered by the previous session's record-breaking one-day drop, but investors expected more falls.
Bullion yesterday recorded its biggest ever daily fall in dollar terms - at one point it was down $142 an ounce - catching gold bulls, speculators and veteran investors by surprise.
Gold has fallen about 20% so far this year after an unbroken 12 years of gains and is some 28% down from the record high hit in September 2011 at $1,920.30.
The asset has been undermined by a proposed sale of Cypriot gold holdings and uncertainty over the US Federal Reserve's stimulus programme.
It failed to capitalise on tensions in the Korean Peninsula even as Pyongyang made new threats of military action.
Yesterday's drop in spot gold, closing down around $125 an ounce, eclipsed the rout on January 22, 1980, a day after gold hit its then-record $850 on global panic over oil-led inflation due to Soviet intervention in Afghanistan and the Iranian revolution.
Gold hit an 11-month high in October last year after the US Federal Reserve announced its third round of aggressive economic stimulus, raising fears the central bank's money-printing to buy assets would stoke inflation.
But the gain was erased by a rally in equities, talks the Fed could reduce its bullion-friendly bond buying programme, and concerns other indebted euro zone countries could follow Cyprus' plan to sell bullion reserves to raise cash.
Heavy outflows on global gold exchange-traded funds, which cut holdings to their lowest in more than a year, could also mark the end of a love affair between gold and investors.
Physical dealers saw inquiries from jewellers following the latest sell-off, but there were no signs of buying related to tensions between the two Koreas or bombings in Boston, which killed three people.
It was the worst bombing on US soil since security was tightened after the attacks of September 2001.
Platinum and palladium, which have also been hammered by heavy selling, regained strength after Japanese shares pared losses due to renewed weakness in the yen.
Spot platinum was up 3% to $1,443 an ounce and palladium rose 4% to $678.50. Silver also rallied 5.3% to $23.78 after dropping 12.6% yesterday.
