Gold prices slipped to a six-week low on Thursday as they were put under pressure by a firmer US dollar and prospects of major global central banks raising interest rates aggressively to bring down inflation.
Spot gold was down 0.4 per cent at $1,704.69 an ounce, as of 3.25am GMT, after hitting its lowest point since July 21 at $1,701.10 earlier in the day. US gold futures shed 0.6 per cent to settle at $1,715.60.
The European Central Bank will probably raise interest rates by quite a bit and that, coupled with the Fed mentioning it is looking to combat inflation even if it affects the economy, has weighed on precious metals, said Brian Lan, managing director at Singapore-based dealer GoldSilver Central.
Eurozone inflation rose to a record high last month, solidifying the case for further big rate increases.
Meanwhile, Cleveland Fed president Loretta Mester said the US central bank would need to raise rates above 4 per cent by early next year and then hold them there to bring inflation back down to its goal.
Even though gold is considered to be a hedge against inflation, higher interest rates increase the opportunity cost of holding bullion while boosting the dollar.
Making bullion more expensive for buyers holding other currencies, the dollar hovered close to a two-decade peak scaled earlier this week. Holdings of SPDR Gold Trust, the world's largest exchange-traded fund that is gold-backed, fell 0.3 per cent to 973.37 tonnes on Wednesday.
Elsewhere, spot silver was down 1.4 per cent at $17.72 an ounce after falling to a more than two-year low.
Silver has industrial and jewellery uses, and these sectors have not picked up yet, according to Mr Lan. The metal has been overdone a little and might be due for a consolidation, he said.
Platinum fell 0.4 per cent to $842.63 and palladium edged 0.2 per cent lower to $2,080.68.
