Gold futures plunged the most since June 2006 after the Federal Reserve reduced American borrowing costs less than investors expected and signaled more cuts won’t be as aggressive. Silver tumbled more than 7%.

The Fed Tuesday reduced the overnight-lending rate 0.75 percentage point to 2.25%. Interest-rate futures showed more bets on a reduction to 2%. Two days ago, gold reached a record $1,033.90 an ounce as cuts to the benchmark rate sent the dollar to an all-time low against the euro.

“It’s a function of expectations,” a manager of $1.5 billion at Delta Global Advisors Inc. in Huntington Beach, Calif., Chip Hanlon, said. “Market sentiment has changed to ‘maybe the Fed can bail us out.’ Investors who want to own gold should be aware the correction could be sharp in price and prolonged in time.”

Gold futures for April delivery fell $59, or 5.9%, to $945.30 an ounce on the Comex division of the New York Mercantile Exchange. That marked the biggest percentage drop for a most-active contract since June 13, 2006. The metal climbed in the previous six sessions, gaining 3.3%.

Gold for immediate delivery dropped $37.54, or 3.8%, to $944.70 an ounce at 4:52 p.m. New York time.

Silver futures for May delivery fell $1.515, or 7.6%, to $18.445 an ounce, marking the biggest percentage decline since August 16. The price is still up 24% this year. Before today, gold climbed 20% in 2008 after gaining for seven straight years.

“There is some measurable support for gold in the low $900s,” Mr. Hanlon said. “There isn’t heavy support until $800. It may sound like a dramatic decline, but it’s a correction in a bull market.”