NEW YORK (MarketWatch) — Soothing talk from Federal Reserve officials boosted other markets Thursday, but failed to stem a stampede out of gold, with the metal extending a late drop beyond the close of floor trade to dip below $1,200 an ounce for the first time in nearly three years.

Gold for August delivery US:GCQ3 ended down $18.20 an ounce at $1,211.60 on the New York Mercantile Exchange.

And the pressure didn’t let up in electronic trade, with the contract dipping as low as $1,196.10 before changing hands in recent action at $1,201.10. Gold hadn’t traded below $1,200 an ounce since August 2010, according to FactSet.

Gold might continue to fall as real interest rates — the return on bonds minus inflation — continue to rise.

“Already our measure of global real interest rates…was rising [in] early April, with this having shown a strong negative correlation with gold over the longer term,” said Simon Smith, chief economist at FxPro in London.

“The gains of recent years have hidden investors from the fact that gold is a risky asset offering no income stream, so we’re seeing a reality check, one which is likely to continue so long as real interest rates keep moving higher,” Smith said.

But Thursday’s drop came as Treasurys rebounded, pulling yields back from recent multiyear highs, and a dollar rally weakened. U.S. stocks were higher after Federal Reserve officials, including New York Fed President William Dudley, indicated investors had overreacted to remarks last week by Fed Chairman Ben Bernanke indicating that the central bank could begin to scale back the flow of monetary stimulus as soon as later this year. See: 3 more Fed officials chastise ‘feral hogs.’

The speed of gold’s decline has caught even bears by surprise, leading strategists to caution speculators against chasing further near-term price drops.

A bottom “couldn’t be too far away now, because miners are increasingly finding it difficult to produce gold profitably which has actually forced some of them to simply cease production,” said Fawad Razaqzada, analyst at GFT. “As the supply of gold reduces with falling prices and physical demand remains ever so strong, it is only a matter of time before we see higher prices for gold. But with sentiment remaining decisively bearish for now, the best course of action would probably be to stay on the sidelines.”

Gold goes for gains after nearly 4% slide in the previous session. Reuters

Gold on Wednesday slid $45.30, or 3.6%, to $1,229.80 an ounce, the lowest close for a most-active contract since August 2010, according to FactSet. The front-month silver contract also finished Wednesday with its lowest settlement level since August 2010, ending at $18.59 an ounce.

Silver for July delivery on Thursday SIN23, fell six cents in floor trade to close at $18.53 an ounce.

The ICE dollar index DXY, -0.01% , which measures the U.S. unit against six other major currencies, traded at 82.991 in recent action, little changed from 82.964 late Wednesday.

U.S. stocks rallied for a third session in a row. The Commerce Department reported consumer spending rose 0.3% in May and wages rose 0.5%. Separately, the Labor Department said first-time claims for unemployment benefits declined by 9,000 to 346,000 in the latest week.

Economists polled by MarketWatch expected consumer spending to rise 0.3%, with incomes rising a slightly smaller 0.2%.

Gold tumbles on worry over Fed

Monetary stimulus from the Fed and other central banks have been cited as supporting gold’s rally in recent years.

Jeffrey Currie, global head of commodities at Goldman Sachs, told CNBC in an interview on Wednesday that selling for gold has gone too far and that prices will even out over the next few weeks and months.

Elsewhere in the metals complex Thursday, July copper HGN23, rose by a penny to $3.05 a pound, and September palladium US:PAU3 climbed $17.45 to close at $650.70 an ounce.

July platinum US:PLN3 gained $21.50 to finish at $1,325.20 an ounce. Platinum’s close on Wednesday at $1,303.70 an ounce was the lowest finish for a front-month contract since September 2009.