Equity markets posted modest gains, with the focus remaining on earnings season.

The dramatic sell-off in gold came in a matter of minutes in Shanghai. More than 33 tonnes of gold, worth about $1.3 billion, traded in two minutes.

The exact reason for the selling was unclear. Recent strength in the U.S. currency and expectations for higher U.S. rates have undermined the case for holding gold and other precious metals, while analysts also note that China imported a record volume of gold in 2013 that has created an oversupply situation. Still, the swiftness of the decline surprised traders and resulted in two separate trade halts in U.S. gold futures.

The spot price for gold XAU= was at $1,094.5 an ounce, after hitting a low of $1,088.50 overnight.

"We have breached significant support levels, we know U.S. rate hikes are coming, there is no inflation and there is no catalyst to hold gold when other markets are doing better," Societe Generale analyst Robin Bhar said.