(Reuters) - Gold prices slipped to a six-week low on Thursday, pressured by a firmer U.S. dollar and prospects of major global central banks increasing interest rates aggressively to bring down inflation.
Spot gold was down 0.4% at $1,704.69 per ounce, as of 0325 GMT, after hitting its lowest since July 21 at $1,701.10 earlier in the day. U.S. gold futures shed 0.6% to $1,715.60.
The European Central Bank will probably raise interest rates by quite a bit and that coupled with the Fed mentioning they are 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.
Euro zone inflation rose to a record high last month, solidifying the case for further big rate hikes.
Meanwhile, Cleveland Fed President Loretta Mester said the U.S. central bank would need to boost rates somewhat above 4% by early next year and then hold them there to bring inflation back down to its goal.
Even though gold is seen as 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 gold-backed exchange-traded fund, fell 0.3% to 973.37 tonnes on Wednesday.
Elsewhere, spot silver was down 1.4% at $17.72 per ounce after falling to a more than two-year low.
Silver has industrial and jewellery uses, and these sectors have not picked up yet, Lan said, adding that the metal had been overdone a little and might see a consolidation.
Platinum fell 0.4% to $842.63 and palladium edged 0.2% lower to $2,080.68.