Gold hit its lowest in a week on Thursday, pressured by heavy fund liquidation a day after European Commission documents showed Cyprus must sell around 400 million euros' ($523 million) worth of gold reserves under its bailout.

Heavy outflows from exchange-traded funds, a second cut in six weeks in Goldman Sachs' 2013 gold price forecast, and uncertainty over the U.S. Federal Reserve's stimulus programme also dragged on prices.

Gold fell to its lowest since April 5 at $1,553.10 an ounce and then recovered to $1,557.81 by 1032 GMT, broadly flat on the day. On Wednesday gold had posted its biggest one-day fall since Feb. 20, accelerating losses after news of the Cyprus gold sale plan.

"The Cyprus news has damaged gold in the last 24 hours in conjunction with the Goldman gold downgrade and the 17-tonne outflows from the metal's exchange-traded funds," Societe Generale analyst Robin Bhar said.

"Rallies are there to be sold at the moment, and that is shown by the price action, as there was no reaction to the Korea tensions or to the Cyprus bailout itself," Bhar added.

Cyprus' sale plan, set out in a draft assessment of Cypriot financing needs prepared by the European Commission, would be the first major gold disposal by a euro area central bank since France sold 17.4 tonnes of gold in the first half of 2009.

At current prices, 400 million euros' worth of gold amounts to 10.36 tonnes of metal. Cyprus' total bullion reserves stood at 13.9 tonnes at end-February, according to data from the World Gold Council.

Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust GLD, fell 1.4 percent to 38.051 million ounces on Wednesday.

FED STIMULUS FEARS

Gold also suffered on fears over a change in the Federal Reserve's monetary stance after central bank officials appeared on course last month to end their extraordinary bond-buying stimulus by year-end, suggesting a weak March jobs report may have taken them by surprise.

"Given the significantly weaker-than-expected employment print in March, the focus on U.S. economic data is bound to become more acute in the coming weeks and months as the market searches for clues on whether the current momentum of opinion at the Fed continues or stalls," UBS said in a note.

Gold last year jumped to an 11-month high in October after the Fed announced its third round of aggressive economic stimulus, raising fears the central bank's money-printing to buy assets would stoke inflation.

In wider markets, European shares rose slightly after posting their biggest their biggest daily rise in three months in the previous session, and the euro also edged higher versus the dollar and hit a three-year high against the yen.

Gold was little affected by tensions in North Korea, with limited bargain hunters and jewellers in Asia resurfacing as South Korea and the United States remained on high alert for any missile launch.

Premiums for gold bars were unchanged at $1.20 an ounce to the spot London prices in Singapore and at $1.20 to $1.50 in Hong Kong, suggesting that the buying interest remained moderate.

Silver was down 0.2 percent at $27.56 an ounce.

Spot palladium, which fell to its lowest in three months in the previous session, was down 0.7 percent to $713.97, while spot platinum was down 0.1 percent at $1,521.49 an ounce. – Reuters