Gold futures fell to a four-month low on Thursday as the dollar gained against the euro and dampened the investment appeal of the precious metal.

Gold for June delivery dropped $14.20, or 1.6 percent, to close at $850.90 an ounce on the Comex division on the New York Mercantile Exchange. Earlier, the price touched $848.50, the lowest for a most-active contract since Jan. 2.

The return of dollar strength this morning has led to a swift reversal in direction with gold dropping back to $864, and given the pace of decline, suggests gold will remain at risk to further corrections in the coming sessions, said James Moore, an analyst at TheBullionDesk.com, in a research note.

The precious metal closed Wednesday's regular trading session with a sharp plunge, ending down $11.70 at $865.10. In electronic trading, gold rallied after receiving a boost by the Federal Reserve's decision to cut the fed funds rate by 25 basis points to 2 percent.

In currency trading, the dollar hit a five-week high on speculation the Federal Reserve will not allow any further rate cuts, for now. The dollar rose as much as 1.2 percent to $1.5431 per euro, the highest since March 25.

The dollar index, a gauge of six major currencies including the euro, yen and U.K. pound, rose 1 percent to 73.31.

The return of dollar strength this morning has led to a swift reversal in direction with gold dropping back to $864, and given the pace of decline, suggests gold will remain at risk to further corrections in the coming sessions, said James Moore, an analyst at TheBullionDesk.com.

Also on the Nymex, July silver lost 39 cents to end at $16.20 an ounce and July platinum fell $52.90 to $1,882.30 an ounce. June palladium dropped $7.25 to $415.50 an ounce. July copper futures fell 21 cents to end at $3.69 a pound.

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