Gold turned lower on Thursday, as sterling bounced higher and U.S. stock markets came well off their lows following the suspension of Britain's campaign for next week's referendum after a member of Parliament was shot dead.
British Member of Parliament Jo Cox, who was killed in the street in her constituency in northern England earlier in the day, had been a vocal supporter of Britain remaining within the EU.
The turnaround in bullion prices, their first drop in seven sessions, came after rallying to the highest in nearly two years, buoyed by the U.S. Federal Reserve, which sounded a dovish note after its latest policy meeting on Wednesday.
In euro and sterling terms, the metal turned lower after reaching three-year highs. Spot gold was down 0.4 per cent at US$1,285.76 an ounce by 2:40 p.m. EDT (1840 GMT), after rising to US$1,315.55 an ounce, the highest since August 2014.
Spot prices have bounced 6 per cent this month, after the approaching June 23 referendum - when Britons will vote on whether or not to leave the European Union, dubbed "Brexit" - dented appetite for assets viewed as higher risk, sending investors scurrying for bonds and gold.
After the attack, campaigning for next week's referendum was suspended.
U.S. gold futures for August delivery settled up 0.8 per cent at US$1,298.40 an ounce.
"A rebound in the euro and sterling, and a mirrored decline in the dollar, set gold up for a retracement," said James Steel, chief metals analyst for HSBC Securities in New York.
"Recovery in equities may also imply some dimming in risk-off related purchases of gold."
Yields on most U.S. Treasury yields rose to session highs after British campaigning for the Brexit vote was suspended following MP Cox's death.
Expectations that the U.S. central bank would press ahead with interest rate increases over the summer faded earlier this month after the release of weak U.S. payrolls data for May.
"Brexit worries then gave us the next boost and yesterday the FOMC provided enough dovish ammunition for it to make a new high," said Saxo Bank's head of commodity research, Ole Hansen.
On Wednesday, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, rose to the highest since October 2013.
Silver fell 0.4 per cent to US$17.43 an ounce, platinum lost 0.1 per cent to US$969.67 and palladium was up 0.2 per cent at US$533.11.
