Gold fell more than 1% on Thursday, extending the previous session's losses, after the CME Group raised trading margins by the most in over two and a half years to curb volatility in bullion that had surged to dizzying heights.
Spot gold dropped by more than 4% on Wednesday, its biggest drop since December 2008, as investors liquidated positions after the precious metal surged nearly 35% this year to a record high above USD 1,911 on Tuesday.
CME increased margin requirements on its gold futures contract by 27%, the second hike in a month, following similar moves by the Shanghai Gold Exchange and Hong Kong Mercantile Exchange earlier this month.
Data suggesting the US economy was facing a slowdown instead of a recession also took the shine off safer assets like gold.
"A lot of hot money has entered the complex and the rally was done too much in too short a time," said David Thurtell, an analyst at Citigroup.
"Last 24 hours there was definitely profit-taking. With the margin hike, if speculators don't have the money to pull out as extra margin they'll just cut their positions. That contributed to the liquidation."
Spot gold slipped as much as 1.3% to USD 1,728.59 an ounce, before recovering some ground to trade at $1,739.80 by 0617 GMT. On Wednesday, bullion dropped 4.3%, its biggest daily drop since December 1, 2008.
US gold fell 0.8% to USD 1,742.90, after dropping 5.6% on Wednesday, the steepest daily drop since March 2008.
