The metal's 2.7 percent slide was its biggest one-day drop since Feb. 29, 2012, when it had plummeted 5 percent as investors questioned the Fed's commitment over its loose monetary policy. Silver and platinum group metals also dropped sharply. Bullion was already under heavy pressure before the Fed minutes, because of widespread rumors of a large commodity hedge fund forced to liquidate its holdings, which triggered a broad sell-off in other industrial commodities led by crude oil. Gold selling accelerated after bullion slipped below $1,600 an ounce and completed a bearish technical formation known as a "death cross", when its 50-day moving average broke below its 200-day moving average. "People are taking a step back and asking themselves 'Is the Fed going to stop quantitative easing earlier?'" said Axel Merk, chief investment officer of Merk Funds which manages $630 million in mutual fund assets. Spot gold was down 2.8 percent to $1,558.54 an ounce by 2:54 p.m. EST (1954 GMT), having hit $1,558.24, its lowest since July 12. US gold futures for April delivery settled down $26.20 at $1,578 an ounce, with trading volume about 30 percent above its 250-day average, preliminary Reuters data showed. "A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the (policy-setting) committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred," the Federal Open Market Committee minutes released on Wednesday said. The Fed voted last month to maintain its third round of so-called quantitative easing, or QE3, at a $85 billion monthly pace, and said it would buy bonds until it saw a substantial improvement in the outlook for the labor market, which remains under pressure with the jobless rate at 7.9 percent. Minutes from the December meeting showed some policymakers had been mulling a lessening or complete withdrawal of Fed stimulus. Silver fell 3.9 percent to $28.28 an ounce, platinum dropped 2.7 percent to $1,641.49.