(Reuters) - Gold prices fell on Thursday, as the U.S. dollar and Treasury yields rebounded after comments by Federal Reserve officials pointed towards further interest rate hikes, despite signs of slowing inflation in the world's largest economy.
Spot gold was down 0.3% at $1,786.17 per ounce, as of 0422 GMT, after hitting its highest since July 5 at $1,807.79 on Wednesday.
U.S. gold futures dipped 0.6% to $1,802.10.
"Following U.S. inflation numbers, the dollar sold off very sharply and yields also dropped, but by the end of the day, the bond yields came back up and the dollar is slightly stronger now, which is hurting gold," said Edward Meir, an analyst with ED&F Man Capital Markets.
"Also, Fed officials said they still need to raise rates, which are bearish for gold. We could see a pullback in gold prices in the short-term towards $1,780."
The dollar regained some footing to trade up 0.2% at 105.420, after falling to its lowest since June 29 at 104.630 on Wednesday. Benchmark U.S. 10-year Treasury yields also rebounded to 2.7910%. [US/] [USD/]
Data showed U.S. consumer prices did not rise in July due to a sharp drop in the cost of gasoline, lifting hopes that the Fed would be less aggressive on its tightening plans going forward.
However, Fed policymakers noted that they would continue to tighten monetary policy until price pressures were fully broken.
Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion.
On the technical front, spot gold may test a support zone of $1,767-$1,773 per ounce, a break below which could open the way towards $1,756, according to Reuters technical analyst Wang Tao. [TECH/C]
Elsewhere, spot silver fell 0.5% to $20.46 per ounce, platinum rose 0.3% to $944.27, and palladium gained 0.2% to $2,244.35.