Gold prices have dropped to a new 16-week low against the backdrop of a stronger US dollar, upbeat global equities and weak demand in leading consumer China.
Spot gold was trading $4.69, or 0.37%, lower to $1,253.45 per ounce at 12:21 GMT after dropping to $1,251.50 an ounce earlier in the day, its lowest since 4 February.
Prices have fallen some 3% over the past two sessions.
US gold futures for delivery in June were trading $6.60, or 0.52%, lower to $1,252.70 an ounce.
The greenback hovered at a two-month high against a basket of major currencies, while global shares traded near record highs on speculation that the European Central Bank (ECB) will roll out new stimulus measures when its Governing Council meets on 5 June.
A stronger US dollar makes it more expensive for holders of other currencies to trade in dollar-denominated commodities such as gold. Upbeat equities dent bullion's safe-haven investment appeal.
UniCredit Research said in a note to clients: "We expect the ECB to announce a package of policy measures next week. At a minimum, this is likely to include a 10-15bp cut in both the refi and the deposit rates, as well as the extension of the full allotment well into 2016.
"However, we suspect the ECB will go beyond this. [ECB President Mario] Draghi's words at the beginning of May have meaningfully raised market expectations for action, and the ECB will want to appear bold. The risk is that monetary conditions may quickly start tightening anew if ECB moves are perceived as too timid."
"Therefore, [on 5 May] we also expect targeted measures to improve the transmission mechanism of monetary policy. A long-term liquidity provision to banks conditional on lending activity appears likely, while any purchase programme would: 1. Involve only private assets and 2. Be of limited size if it is to be up and running from day one.
"Given that the ECB's new macroeconomic projections are unlikely to flag any material risk of outright deflation, full-blown QE is going to remain off the central bank's radar screen," UniCredit added.
Chinese Imports Drop
Commerzbank said in a note: "...The gold price slumped by approx. 2% [on 27 May] and fell overnight to a 3½-month low of $1,261 per troy ounce – its biggest percentage daily loss in nearly half a year. Selling pressure evidently stemmed from the futures market; we will obtain a clearer picture on [30 May] when the [US] CFTC's market positioning data are published, covering the week of trading up to and including [27 May]."
"The price slump was triggered by reports from Asia: the Census and Statistics Department of the Hong Kong government announced that China's net gold imports from the former British crown colony totaled 67 tons in April, the lowest figure in 14 months. Following record-high gold imports last year and cooling demand in the current year, many Chinese banks are now clearly sitting on considerable gold stocks which they are keen to reduce before they import any new gold from Hong Kong..."