Gold fell more than half a per cent on Thursday, backing away from the previous session's record high above US$1,440 an ounce, on a peace plan for Libya proposed by OPEC-member Venezuela to end violent unrest in the country.
Arab League Secretary General Amr Moussa said on Thursday that the a plan to bring peace to proposed by Venezuelan leader Hugo Chavez was "under consideration."
News network Al Jazeera said earlier the plan involved a commission from Latin America, Europe and the Middle East trying to reach a negotiated outcome between Libyan leader Muammar Gaddafi and rebel forces for this North African oil-producing country.
"If some sort of resolution is achieved for Libya, it will certainly affect gold -- investors will take profit and adjust their long positions," said Ong Yi Ling, an analyst at Phillip Futures.
Investors had not expected a prompt resolution to the Libya crisis, and bet on further rise in gold.
Spot gold fell as much as 0.7 per cent and more than $11 from an intraday high of $1,436.15 at heel of the news. It was trading at $1,425.76 an ounce by 0802 GMT, down 0.6 per cent.
Prices dropped as low as $1,422.35, flirting with support at $1,420.
U.S. gold futures lost 0.8 per cent at $1,426.80.
Brent crude dropped more than $3 on the news to an intra-day low of $113.09 a barrel, before recovering to near $115 by 0700 GMT.