The gold party was cut short on Friday as the precious metal lost 2.8% in one day, trading at $1,325.
The drop follows a 4.5% gain on Wendesday – gold's biggest one-day rise since June 2012.
Fed Chairman Ben Bernanke's announcement that tapering was nowhere on the horizon had boosted bullion to $1,373.
Now, its a different Fed that's to blame. Federal Reserve Bank of St. Louis President James Bullard said on Friday that the US bank's $85 billion per month asset purchase program might slow down in October.
In a statement on the St. Louis Fed's website, Bullard noted the importance of unemployment and nonfarm payroll data.
"To the extent that these two important labor market indicators continue to show improvement, the likelihood of tapering policy action will continue to rise,” Bullard said, adding that the labour market's gains compared to September 2012 would "increase the probability of tapering."
However, in a presentation on Friday, Bullard pointed out that the Fed's 'hawkish' words on tapering in June turned 'dovish' this month due to weaker-than-expected data during the intermeeting period.
He also said that he would not "endorse less accommodative policy action by the FOMC" until he saw evidence of rising inflation.
James Steel, chief precious metals analyst at HSBC, told Reuters that Bullard's comments have "injected some uncertainty near term, and that has prompted a wave of selling in the gold and the precious metals complex."