Gold's unexpected move has spooked investors even as it has been shown by US inflation data which fell sharply in May.
The yellow metal traded weak in the Asian session at around $1,946 an ounce, while gold futures were higher at $1,960 an ounce.
Earlier, as soon as the inflation data was released, the price of gold jumped as high as $1,970 before plunging lower to around $1,940 soon after.
The fall was due to the 10-year US treasury yield surging to a three-week high of 3.845%.
This resulted in gold failing to take advantage of the opportunity to strengthen following US consumer price index (CPI) data which fell to a two-year low of 4.0% last month from 4.9%.
Following that, investors strengthened expectations for the Federal Reserve (Fed) to keep interest rates unchanged at its policy meeting early Thursday morning.
Overall, gold prices have remained in a trading range between $1,930 and $1,980 over the past three weeks.
