"Ever since the gold attained the 18,000 level, it started showing resistance, turning the market volatile. Now it is dominated by hedgers and arbitragers, traders said.
"Also, the swinging dollar against major currencies has resulted in wide price movement in gold at global levels helping the speculators to take advantages of the situation," they added.
Standard gold (99.5 purity) tanked by Rs 305 per ten grams to close at Rs 17,305 from overnight's closing level of Rs 17,610. Pure gold (99.9 purity) dropped by a similar margin to end at Rs 17,395 from Rs 17,700 on Tuesday.
Silver ready (.999 fineness) tumbled by Rs 600 per kg to finish at Rs 28,710 as against Rs 29,310 on Tuesday.
Gold futures fell on Tuesday in New York for the third straight session after the dollar gained against the euro and basket currencies.
Gold December delivery fell by $20.40 to end at $1,142.80 an ounce on the NYMEX's Comex division. December silver also dropped by 5.51 cents to $17.785 an ounce.