Gold gave back early speculative gains on Thursday as new long positions were quickly sold again. What initially seemed to be the start of a sustained rise was turned on its head by nervous investors banking quick profits.
"Investors got wrong-footed this morning," a London dealer said.
"It looked like it had built a base of support and buyers stepped back in prematurely."
Dealers are awaiting the US Federal Reserve's rate-setting meeting on June 28-29 and keeping an eye on US equities and currency markets.
Spot gold hit $594.80 an ounce, its highest since June 13, before tumbling two percent to $581.50/582.50 by 1430 GMT, against $589.20/589.90 late in New York.
Gold, used in jewellery and investment, gained more than 2 percent on Wednesday on fund buying, triggered by a weaker dollar and stronger crude oil prices.
Oil prices climbed to $71 a barrel on Thursday after a smaller-than-expected rise in US gasoline stocks reignited talk of resilient oil demand in the world's top consumer.
Copper gained more than five percent on speculative buying, before it, too, crumbled in later trading.
"The push by investors into commodities has not run its course but the panic to buy has been eliminated. Those who think commodities are a one-way bet have either been on holidays for the past 5-6 weeks, or have an unrealistic view of commodity cycles," Commonwealth Bank of Australia said in a report.
The Fed is seen raising interest rates by a quarter percentage point to 5.25 percent in its 17th straight rate rise. Investors would look for signs for another rise in August.
Higher US rates support the dollar and may diminish gold's allure as an alternative investment.
"No big bulls will come to the market ahead of the meeting. I am still bullish but I don't want to make any big moves until we clear June," a trader in Singapore said.
An official and an economist at the central bank in China wrote in an article that the country should convert some of its foreign exchange reserves, the world's largest, into gold to hedge against dollar weakness.
"We have heard similar comments on many occasions and we do not believe that this represents a change in policy," UBS said in a report.
In other precious metals, platinum rose to a two-week high of $1,198 an ounce before dropping to $1,174/1,180, versus $1,183/1,191 late in the US market.
Palladium was quoted at $313/318 from $310/315 in New York.
Silver rose as high as $10.68 an ounce from $10.51/10.61, but by 1440 GMT it was down to $10.27/10.37.
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