Gold bullion prices sank $7 per ounce as London closed on Wednesday, dropping nearly 1.5% ahead of the US Fed's decision on Dollar interest rates at 14:15 in Washington.
The gold bullion market dropped hard against all major currencies before bouncing off key levels versus Sterling and Euros.
Consensus expectations for "no change" at the Fed were spooked by news that MBA mortgage applications rose 3.6% last month, against a 0.6% rise in April.
No change remained the unanimous call on Wall Street. But hopes of lower US rates faded along with the day's short-lived rally in gold.
"At the moment, I wouldn't think that people would take a lot of positions ahead of the Federal Reserve meeting," reckoned Michael Widmer, director of metals research at Calyon Bank.
"It would be interesting to see whether [the Fed] say something about the slowdown in US economic growth, and I think that would be interpreted by the gold market as a hint towards lower interest rates.
"[That] would be negative for the Dollar and very bullish for gold." (Find out why here...)
The Euro price of gold slipped to bounce of €500 per ounce.
Versus the British Pound gold prices slipped to £340 per ounce, a one-week low, before turning higher after the London close.
Further central bank action is due Thursday, when the Bank of England is sure to raise Sterling interest rates to at least 5.50%. The European Central Bank has already signaled it will keep Euro rates on hold at 3.75%. (Get the real story about Sterling here...)
"I am still looking for an opportunity to buy gold on the dips," said John Reade, head of metals strategy at UBS Investment Bank in a note Tuesday.
"But speculative positions remain very high at the moment and that makes me cautious about buying gold at these levels."
Gold's recent highs also appear to have spurred fresh sales by European central banks.
Yesterday's data release showed sales worth €186 million – some $252 million – last week by members of the Central Bank Gold Agreement.
European central banks have now sold gold to the value of around €1.7 billion this year.
"Central banks will continue to sell," says one fund manager. "They see these prices as being high."
But the Central Bank Gold Agreement limits the signatories' sales to 500 tonnes per year over five years.
Midway through the term, how much gold do they have left? Get the answer here...